Correlation Between Centrex Metals and Bluescope Steel

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Can any of the company-specific risk be diversified away by investing in both Centrex Metals 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 Centrex Metals and Bluescope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centrex Metals and Bluescope Steel, you can compare the effects of market volatilities on Centrex Metals 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 Centrex Metals with a short position of Bluescope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrex Metals and Bluescope Steel.

Diversification Opportunities for Centrex Metals and Bluescope Steel

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Centrex and Bluescope is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Centrex Metals and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Centrex Metals 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 Centrex Metals 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 Centrex Metals i.e., Centrex Metals and Bluescope Steel go up and down completely randomly.

Pair Corralation between Centrex Metals and Bluescope Steel

Assuming the 90 days trading horizon Centrex Metals is expected to under-perform the Bluescope Steel. In addition to that, Centrex Metals is 2.41 times more volatile than Bluescope Steel. It trades about -0.25 of its total potential returns per unit of risk. Bluescope Steel is currently generating about -0.1 per unit of volatility. If you would invest  2,220  in Bluescope Steel on September 29, 2024 and sell it today you would lose (298.00) from holding Bluescope Steel or give up 13.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Centrex Metals  vs.  Bluescope Steel

 Performance 
       Timeline  
Centrex Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Centrex Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary 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.
Bluescope Steel 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 uncertain performance in the last few months, the Stock's essential 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.

Centrex Metals and Bluescope Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Centrex Metals and Bluescope Steel

The main advantage of trading using opposite Centrex Metals and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrex Metals 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 Centrex Metals 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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