Correlation Between Materialise and BlueScope Steel

Can any of the company-specific risk be diversified away by investing in both Materialise and BlueScope Steel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Materialise and BlueScope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Materialise NV and BlueScope Steel Limited, you can compare the effects of market volatilities on Materialise and BlueScope Steel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Materialise with a short position of BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materialise and BlueScope Steel.

Diversification Opportunities for Materialise and BlueScope Steel

0.26

Correlation Coefficient

Materialise  BlueScope Steel

Modest diversification

The 3 months correlation between Materialise and BlueScope is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel and Materialise is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Materialise NV are associated (or correlated) with BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Materialise i.e., Materialise and BlueScope Steel go up and down completely randomly.

Pair Corralation between Materialise and BlueScope Steel

Assuming the 90 days trading horizon Materialise NV is expected to generate 1.61 times more return on investment than BlueScope Steel. However, Materialise is 1.61 times more volatile than BlueScope Steel Limited. It trades about 0.18 of its potential returns per unit of risk. BlueScope Steel Limited is currently generating about 0.09 per unit of risk. If you would invest  466.00  in Materialise NV on September 3, 2024 and sell it today you would earn a total of  219.00  from holding Materialise NV or generate 47.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Materialise NV  vs.  BlueScope Steel Limited

Materialise NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

BlueScope Steel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BlueScope Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materialise and BlueScope Steel

The main advantage of trading using opposite Materialise and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materialise position performs unexpectedly, BlueScope Steel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BlueScope Steel will offset losses from the drop in BlueScope Steel's long position.

The idea behind Materialise NV and BlueScope Steel Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.