Correlation Between BlueScope Steel and KAP AG

Can any of the company-specific risk be diversified away by investing in both BlueScope Steel and KAP AG 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 KAP AG 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 KAP AG, you can compare the effects of market volatilities on BlueScope Steel and KAP AG 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 KAP AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and KAP AG.

Diversification Opportunities for BlueScope Steel and KAP AG

-0.28

Correlation Coefficient

BlueScope Steel  KAP AG

Very good diversification

The 3 months correlation between BlueScope and KAP is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and KAP AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAP AG 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 KAP AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAP AG has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and KAP AG go up and down completely randomly.

Pair Corralation between BlueScope Steel and KAP AG

Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 0.45 times more return on investment than KAP AG. However, BlueScope Steel Limited is 2.22 times less risky than KAP AG. It trades about 0.12 of its potential returns per unit of risk. KAP AG is currently generating about 0.02 per unit of risk. If you would invest  1,190  in BlueScope Steel Limited on April 22, 2025 and sell it today you would earn a total of  160.00  from holding BlueScope Steel Limited or generate 13.45% return on investment over 90 days.

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

BlueScope Steel Limited  vs.  KAP AG

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 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BlueScope Steel reported solid returns over the last few months and may actually be approaching a breakup point.

KAP AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KAP AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KAP AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BlueScope Steel and KAP AG

The main advantage of trading using opposite BlueScope Steel and KAP AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel position performs unexpectedly, KAP AG 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 KAP AG will offset losses from the drop in KAP AG's long position.

The idea behind BlueScope Steel Limited and KAP AG 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.