Correlation Between K2 Asset and Bluescope Steel

Can any of the company-specific risk be diversified away by investing in both K2 Asset 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 K2 Asset and Bluescope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K2 Asset Management and Bluescope Steel, you can compare the effects of market volatilities on K2 Asset 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 K2 Asset with a short position of Bluescope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Bluescope Steel.

Diversification Opportunities for K2 Asset and Bluescope Steel

-0.03

Correlation Coefficient

K2 Asset  Bluescope Steel

Good diversification

The 3 months correlation between KAM and Bluescope is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and K2 Asset 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 K2 Asset Management 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 K2 Asset i.e., K2 Asset and Bluescope Steel go up and down completely randomly.

Pair Corralation between K2 Asset and Bluescope Steel

Assuming the 90 days trading horizon K2 Asset Management is expected to generate 1.82 times more return on investment than Bluescope Steel. However, K2 Asset is 1.82 times more volatile than Bluescope Steel. It trades about 0.3 of its potential returns per unit of risk. Bluescope Steel is currently generating about -0.12 per unit of risk. If you would invest  6.00  in K2 Asset Management on September 20, 2024 and sell it today you would earn a total of  1.50  from holding K2 Asset Management or generate 25.0% return on investment over 90 days.

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

K2 Asset Management  vs.  Bluescope Steel

K2 Asset Management

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Asset Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, K2 Asset unveiled 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 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.

Pair Trading with K2 Asset and Bluescope Steel

The main advantage of trading using opposite K2 Asset and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset 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 K2 Asset Management 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 Global Correlations module to find global opportunities by holding instruments from different markets.