Correlation Between BlueScope Steel and Applied Materials

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

Diversification Opportunities for BlueScope Steel and Applied Materials

0.32

Correlation Coefficient

BlueScope Steel  Applied Materials

Weak diversification

The 3 months correlation between BlueScope and Applied is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of BlueScope Steel i.e., BlueScope Steel and Applied Materials go up and down completely randomly.

Pair Corralation between BlueScope Steel and Applied Materials

Assuming the 90 days horizon BlueScope Steel is expected to generate 13.8 times less return on investment than Applied Materials. But when comparing it to its historical volatility, BlueScope Steel Limited is 1.11 times less risky than Applied Materials. It trades about 0.01 of its potential returns per unit of risk. Applied Materials is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  14,474  in Applied Materials on May 18, 2025 and sell it today you would earn a total of  1,722  from holding Applied Materials or generate 11.9% 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 Limited  vs.  Applied Materials

BlueScope Steel

Risk-Adjusted Performance

Weakest

Over the last 90 days BlueScope Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BlueScope Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Applied Materials

Risk-Adjusted Performance

Fair

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

Pair Trading with BlueScope Steel and Applied Materials

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

The idea behind BlueScope Steel Limited and Applied Materials 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.