Correlation Between Bluescope Steel and Catalyst Metals

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

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

Diversification Opportunities for Bluescope Steel and Catalyst Metals

-0.18

Correlation Coefficient

Bluescope Steel  Catalyst Metals

Good diversification

The 3 months correlation between Bluescope and Catalyst is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Catalyst Metals go up and down completely randomly.

Pair Corralation between Bluescope Steel and Catalyst Metals

Assuming the 90 days trading horizon Bluescope Steel is expected to generate 2.8 times less return on investment than Catalyst Metals. But when comparing it to its historical volatility, Bluescope Steel is 2.4 times less risky than Catalyst Metals. It trades about 0.03 of its potential returns per unit of risk. Catalyst Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  281.00  in Catalyst Metals on September 15, 2024 and sell it today you would earn a total of  9.00  from holding Catalyst Metals or generate 3.2% 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.  Catalyst Metals

Bluescope Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bluescope Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Bluescope Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Catalyst Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Catalyst Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bluescope Steel and Catalyst Metals

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

The idea behind Bluescope Steel and Catalyst Metals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.