Correlation Between BlueScope Steel and Amazon
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BlueScope Steel Ltd and Amazon Inc, you can compare the effects of market volatilities on BlueScope Steel and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Amazon.
Diversification Opportunities for BlueScope Steel and Amazon
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BlueScope and Amazon is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Ltd and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Ltd are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Amazon go up and down completely randomly.
Pair Corralation between BlueScope Steel and Amazon
Assuming the 90 days horizon BlueScope Steel is expected to generate 3.3 times less return on investment than Amazon. In addition to that, BlueScope Steel is 1.26 times more volatile than Amazon Inc. It trades about 0.04 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.16 per unit of volatility. If you would invest 15,534 in Amazon Inc on January 19, 2024 and sell it today you would earn a total of 2,594 from holding Amazon Inc or generate 16.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BlueScope Steel Ltd vs. Amazon Inc
Performance |
Timeline |
BlueScope Steel |
Amazon Inc |
BlueScope Steel and Amazon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BlueScope Steel and Amazon
The main advantage of trading using opposite BlueScope Steel and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.BlueScope Steel vs. Nucor Corp | BlueScope Steel vs. United States Steel | BlueScope Steel vs. Reliance Steel Aluminum | BlueScope Steel vs. ArcelorMittal SA ADR |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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