Correlation Between Bluescope Steel and Caravel Minerals

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

By analyzing existing cross correlation between Bluescope Steel and Caravel Minerals, you can compare the effects of market volatilities on Bluescope Steel and Caravel Minerals 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 Caravel Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluescope Steel and Caravel Minerals.

Diversification Opportunities for Bluescope Steel and Caravel Minerals

0.13

Correlation Coefficient

Bluescope Steel  Caravel Minerals

Average diversification

The 3 months correlation between Bluescope and Caravel is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Caravel Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravel Minerals 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 Caravel Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravel Minerals has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Caravel Minerals go up and down completely randomly.

Pair Corralation between Bluescope Steel and Caravel Minerals

Assuming the 90 days trading horizon Bluescope Steel is expected to under-perform the Caravel Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Bluescope Steel is 1.22 times less risky than Caravel Minerals. The stock trades about -0.22 of its potential returns per unit of risk. The Caravel Minerals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Caravel Minerals on September 24, 2024 and sell it today you would earn a total of  1.00  from holding Caravel Minerals or generate 5.56% return on investment over 90 days.

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

Bluescope Steel  vs.  Caravel Minerals

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 essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Caravel Minerals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caravel Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caravel Minerals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bluescope Steel and Caravel Minerals

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

The idea behind Bluescope Steel and Caravel Minerals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.