Correlation Between BlueScope Steel and Informa PLC

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

Diversification Opportunities for BlueScope Steel and Informa PLC

0.25

Correlation Coefficient

BlueScope Steel  Informa PLC

Modest diversification

The 3 months correlation between BlueScope and Informa is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Informa PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Informa PLC 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 Informa PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Informa PLC has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Informa PLC go up and down completely randomly.

Pair Corralation between BlueScope Steel and Informa PLC

Assuming the 90 days horizon BlueScope Steel is expected to generate 2.08 times less return on investment than Informa PLC. In addition to that, BlueScope Steel is 1.34 times more volatile than Informa PLC. It trades about 0.02 of its total potential returns per unit of risk. Informa PLC is currently generating about 0.05 per unit of volatility. If you would invest  703.00  in Informa PLC on September 29, 2024 and sell it today you would earn a total of  262.00  from holding Informa PLC or generate 37.27% return on investment over 90 days.

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

BlueScope Steel Limited  vs.  Informa PLC

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Informa PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Informa PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Informa PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BlueScope Steel and Informa PLC

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

The idea behind BlueScope Steel Limited and Informa PLC 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.