Correlation Between BlueScope Steel and COSTCO WHOLESALE

Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and COSTCO WHOLESALE 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 COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR, you can compare the effects of market volatilities on BlueScope Steel and COSTCO WHOLESALE 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 COSTCO WHOLESALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and COSTCO WHOLESALE.

Diversification Opportunities for BlueScope Steel and COSTCO WHOLESALE

-0.14

Correlation Coefficient

BlueScope Steel  COSTCO WHOLESALE

Good diversification

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

Pair Corralation between BlueScope Steel and COSTCO WHOLESALE

Assuming the 90 days horizon BlueScope Steel Limited is expected to under-perform the COSTCO WHOLESALE. In addition to that, BlueScope Steel is 1.46 times more volatile than COSTCO WHOLESALE CDR. It trades about -0.06 of its total potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about 0.08 per unit of volatility. If you would invest  2,734  in COSTCO WHOLESALE CDR on September 23, 2024 and sell it today you would earn a total of  206.00  from holding COSTCO WHOLESALE CDR or generate 7.53% return on investment over 90 days.

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

BlueScope Steel Limited  vs.  COSTCO WHOLESALE CDR

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, COSTCO WHOLESALE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BlueScope Steel and COSTCO WHOLESALE

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

The idea behind BlueScope Steel Limited and COSTCO WHOLESALE CDR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.