Correlation Between BLUESCOPE STEEL and Compagnie Financire

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

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

Diversification Opportunities for BLUESCOPE STEEL and Compagnie Financire

-0.24

Correlation Coefficient

BLUESCOPE STEEL  Compagnie Financire

Very good diversification

The 3 months correlation between BLUESCOPE and Compagnie is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding BLUESCOPE STEEL and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financire 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 Compagnie Financire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financire has no effect on the direction of BLUESCOPE STEEL i.e., BLUESCOPE STEEL and Compagnie Financire go up and down completely randomly.

Pair Corralation between BLUESCOPE STEEL and Compagnie Financire

Assuming the 90 days trading horizon BLUESCOPE STEEL is expected to under-perform the Compagnie Financire. But the stock apears to be less risky and, when comparing its historical volatility, BLUESCOPE STEEL is 1.25 times less risky than Compagnie Financire. The stock trades about -0.05 of its potential returns per unit of risk. The Compagnie Financire Richemont is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,160  in Compagnie Financire Richemont on September 22, 2024 and sell it today you would earn a total of  250.00  from holding Compagnie Financire Richemont or generate 21.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

BLUESCOPE STEEL  vs.  Compagnie Financire Richemont

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Compagnie Financire

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with BLUESCOPE STEEL and Compagnie Financire

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

The idea behind BLUESCOPE STEEL and Compagnie Financire Richemont 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.