Correlation Between BlueScope Steel and MUTUIONLINE

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

Diversification Opportunities for BlueScope Steel and MUTUIONLINE

0.22

Correlation Coefficient

BlueScope Steel  MUTUIONLINE

Modest diversification

The 3 months correlation between BlueScope and MUTUIONLINE is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and MUTUIONLINE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUTUIONLINE 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 MUTUIONLINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUTUIONLINE has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and MUTUIONLINE go up and down completely randomly.

Pair Corralation between BlueScope Steel and MUTUIONLINE

Assuming the 90 days horizon BlueScope Steel is expected to generate 1.49 times less return on investment than MUTUIONLINE. But when comparing it to its historical volatility, BlueScope Steel Limited is 1.07 times less risky than MUTUIONLINE. It trades about 0.04 of its potential returns per unit of risk. MUTUIONLINE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,480  in MUTUIONLINE on September 4, 2024 and sell it today you would earn a total of  1,255  from holding MUTUIONLINE or generate 50.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

BlueScope Steel Limited  vs.  MUTUIONLINE

BlueScope Steel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, BlueScope Steel reported solid returns over the last few months and may actually be approaching a breakup point.

MUTUIONLINE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MUTUIONLINE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, MUTUIONLINE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BlueScope Steel and MUTUIONLINE

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

The idea behind BlueScope Steel Limited and MUTUIONLINE 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.