Correlation Between BlueScope Steel and GOODYEAR T

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

By analyzing existing cross correlation between BlueScope Steel Limited and GOODYEAR T RUBBER, you can compare the effects of market volatilities on BlueScope Steel and GOODYEAR T 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 GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and GOODYEAR T.

Diversification Opportunities for BlueScope Steel and GOODYEAR T

0.49

Correlation Coefficient

BlueScope Steel  GOODYEAR T

Very weak diversification

The 3 months correlation between BlueScope and GOODYEAR is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER 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 Limited are associated (or correlated) with GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and GOODYEAR T go up and down completely randomly.

Pair Corralation between BlueScope Steel and GOODYEAR T

Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 0.57 times more return on investment than GOODYEAR T. However, BlueScope Steel Limited is 1.76 times less risky than GOODYEAR T. It trades about 0.11 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about 0.01 per unit of risk. If you would invest  1,240  in BlueScope Steel Limited on April 24, 2025 and sell it today you would earn a total of  150.00  from holding BlueScope Steel Limited or generate 12.1% return on investment over 90 days.

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

BlueScope Steel Limited  vs.  GOODYEAR T RUBBER

BlueScope Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlueScope Steel Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BlueScope Steel may actually be approaching a critical reversion point that can send shares even higher in August 2025.

GOODYEAR T RUBBER

Risk-Adjusted Performance

Very Weak

Over the last 90 days GOODYEAR T RUBBER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GOODYEAR T is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BlueScope Steel and GOODYEAR T

The main advantage of trading using opposite BlueScope Steel and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.

The idea behind BlueScope Steel Limited and GOODYEAR T RUBBER 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.