Correlation Between BlueScope Steel and Ternium SA

Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and Ternium SA 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 Ternium SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BlueScope Steel Ltd and Ternium SA ADR, you can compare the effects of market volatilities on BlueScope Steel and Ternium SA 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 Ternium SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Ternium SA.

Diversification Opportunities for BlueScope Steel and Ternium SA

0.32

Correlation Coefficient

BlueScope Steel  Ternium SA

Weak diversification

The 3 months correlation between BlueScope and Ternium is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Ltd and Ternium SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ternium SA ADR 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 Ltd are associated (or correlated) with Ternium SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ternium SA ADR has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Ternium SA go up and down completely randomly.

Pair Corralation between BlueScope Steel and Ternium SA

Assuming the 90 days horizon BlueScope Steel Ltd is expected to generate 2.0 times more return on investment than Ternium SA. However, BlueScope Steel is 2.0 times more volatile than Ternium SA ADR. It trades about 0.02 of its potential returns per unit of risk. Ternium SA ADR is currently generating about -0.04 per unit of risk. If you would invest  6,464  in BlueScope Steel Ltd on September 14, 2024 and sell it today you would earn a total of  1.00  from holding BlueScope Steel Ltd or generate 0.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

BlueScope Steel Ltd  vs.  Ternium SA ADR

BlueScope Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, BlueScope Steel is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Ternium SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ternium SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Ternium SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BlueScope Steel and Ternium SA

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

The idea behind BlueScope Steel Ltd and Ternium SA ADR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.