Correlation Between BLUESCOPE STEEL and Datang International

Can any of the company-specific risk be diversified away by investing in both BLUESCOPE STEEL and Datang International 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 Datang International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BLUESCOPE STEEL and Datang International Power, you can compare the effects of market volatilities on BLUESCOPE STEEL and Datang International 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 Datang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLUESCOPE STEEL and Datang International.

Diversification Opportunities for BLUESCOPE STEEL and Datang International

0.59

Correlation Coefficient

BLUESCOPE STEEL  Datang International

Very weak diversification

The 3 months correlation between BLUESCOPE and Datang is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 are associated (or correlated) with Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of BLUESCOPE STEEL i.e., BLUESCOPE STEEL and Datang International go up and down completely randomly.

Pair Corralation between BLUESCOPE STEEL and Datang International

Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to generate 0.95 times more return on investment than Datang International. However, BLUESCOPE STEEL is 1.05 times less risky than Datang International. It trades about 0.17 of its potential returns per unit of risk. Datang International Power is currently generating about 0.02 per unit of risk. If you would invest  1,230  in BLUESCOPE STEEL on September 4, 2024 and sell it today you would earn a total of  130.00  from holding BLUESCOPE STEEL or generate 10.57% return on investment over 90 days.

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

BLUESCOPE STEEL  vs.  Datang International Power

BLUESCOPE STEEL

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BLUESCOPE STEEL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BLUESCOPE STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Datang International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Datang International Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Datang International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BLUESCOPE STEEL and Datang International

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

The idea behind BLUESCOPE STEEL and Datang International Power 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.