Correlation Between BLUESCOPE STEEL and Covenant Logistics

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

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

Diversification Opportunities for BLUESCOPE STEEL and Covenant Logistics

-0.1

Correlation Coefficient

BLUESCOPE STEEL  Covenant Logistics

Good diversification

The 3 months correlation between BLUESCOPE and Covenant is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics 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 Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics has no effect on the direction of BLUESCOPE STEEL i.e., BLUESCOPE STEEL and Covenant Logistics go up and down completely randomly.

Pair Corralation between BLUESCOPE STEEL and Covenant Logistics

Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to generate 3.16 times less return on investment than Covenant Logistics. But when comparing it to its historical volatility, BLUESCOPE STEEL is 1.01 times less risky than Covenant Logistics. It trades about 0.01 of its potential returns per unit of risk. Covenant Logistics Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,080  in Covenant Logistics Group on September 30, 2024 and sell it today you would earn a total of  1,220  from holding Covenant Logistics Group or generate 29.9% return on investment over 90 days.

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

BLUESCOPE STEEL  vs.  Covenant Logistics Group

BLUESCOPE STEEL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BLUESCOPE STEEL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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.

Covenant Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BLUESCOPE STEEL and Covenant Logistics

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

The idea behind BLUESCOPE STEEL and Covenant Logistics Group 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.