Correlation Between BlueScope Steel and Avanos Medical

Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and Avanos Medical 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 BlueScope Steel and Avanos Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BlueScope Steel Limited and Avanos Medical, you can compare the effects of market volatilities on BlueScope Steel and Avanos Medical 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 BlueScope Steel with a short position of Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Avanos Medical.

Diversification Opportunities for BlueScope Steel and Avanos Medical

-0.14

Correlation Coefficient

BlueScope Steel  Avanos Medical

Good diversification

The 3 months correlation between BlueScope and Avanos is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical and BlueScope Steel 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 BlueScope Steel Limited are associated (or correlated) with Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Avanos Medical go up and down completely randomly.

Pair Corralation between BlueScope Steel and Avanos Medical

Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 0.91 times more return on investment than Avanos Medical. However, BlueScope Steel Limited is 1.1 times less risky than Avanos Medical. It trades about -0.04 of its potential returns per unit of risk. Avanos Medical is currently generating about -0.2 per unit of risk. If you would invest  1,320  in BlueScope Steel Limited on September 12, 2024 and sell it today you would lose (30.00) from holding BlueScope Steel Limited or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BlueScope Steel Limited  vs.  Avanos Medical

BlueScope Steel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BlueScope Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Avanos Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BlueScope Steel and Avanos Medical

The main advantage of trading using opposite BlueScope Steel and Avanos Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, Avanos Medical 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 Avanos Medical will offset losses from the drop in Avanos Medical's long position.

The idea behind BlueScope Steel Limited and Avanos Medical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.