Correlation Between Bluescope Steel and Tombador Iron

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

Diversification Opportunities for Bluescope Steel and Tombador Iron

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Bluescope and Tombador is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bluescope Steel and Tombador Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tombador Iron 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 Tombador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tombador Iron has no effect on the direction of Bluescope Steel i.e., Bluescope Steel and Tombador Iron go up and down completely randomly.

Pair Corralation between Bluescope Steel and Tombador Iron

If you would invest  1,976  in Bluescope Steel on July 9, 2024 and sell it today you would earn a total of  226.00  from holding Bluescope Steel or generate 11.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Bluescope Steel  vs.  Tombador Iron

 Performance 
       Timeline  
Bluescope Steel 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bluescope Steel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Bluescope Steel may actually be approaching a critical reversion point that can send shares even higher in November 2024.
Tombador Iron 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Tombador Iron are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Tombador Iron unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bluescope Steel and Tombador Iron Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bluescope Steel and Tombador Iron

The main advantage of trading using opposite Bluescope Steel and Tombador Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluescope Steel position performs unexpectedly, Tombador Iron 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 Tombador Iron will offset losses from the drop in Tombador Iron's long position.
The idea behind Bluescope Steel and Tombador Iron 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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