Correlation Between Covenant Logistics and BLUESCOPE STEEL

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

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

Diversification Opportunities for Covenant Logistics and BLUESCOPE STEEL

-0.1

Correlation Coefficient

Covenant Logistics  BLUESCOPE STEEL

Good diversification

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

Pair Corralation between Covenant Logistics and BLUESCOPE STEEL

Assuming the 90 days horizon Covenant Logistics Group is expected to generate 1.22 times more return on investment than BLUESCOPE STEEL. However, Covenant Logistics is 1.22 times more volatile than BLUESCOPE STEEL. It trades about 0.06 of its potential returns per unit of risk. BLUESCOPE STEEL is currently generating about 0.02 per unit of risk. If you would invest  3,094  in Covenant Logistics Group on September 30, 2024 and sell it today you would earn a total of  2,206  from holding Covenant Logistics Group or generate 71.3% return on investment over 90 days.

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

Covenant Logistics Group  vs.  BLUESCOPE STEEL

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.

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.

Pair Trading with Covenant Logistics and BLUESCOPE STEEL

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

The idea behind Covenant Logistics Group and BLUESCOPE STEEL 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.