Correlation Between BlueScope Steel and Penta Ocean

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

Diversification Opportunities for BlueScope Steel and Penta Ocean

0.67

Correlation Coefficient

BlueScope Steel  Penta Ocean

Poor diversification

The 3 months correlation between BlueScope and Penta is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Penta Ocean go up and down completely randomly.

Pair Corralation between BlueScope Steel and Penta Ocean

Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 0.89 times more return on investment than Penta Ocean. However, BlueScope Steel Limited is 1.12 times less risky than Penta Ocean. It trades about 0.12 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.09 per unit of risk. If you would invest  1,190  in BlueScope Steel Limited on April 20, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BlueScope Steel Limited  vs.  Penta Ocean Construction Co

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 unsteady basic indicators, BlueScope Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Penta Ocean Construc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penta Ocean may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with BlueScope Steel and Penta Ocean

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

The idea behind BlueScope Steel Limited and Penta Ocean Construction Co 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.