Correlation Between BLZ and Cloud
Can any of the company-specific risk be diversified away by investing in both BLZ and Cloud 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 BLZ and Cloud into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BLZ and Cloud, you can compare the effects of market volatilities on BLZ and Cloud 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 BLZ with a short position of Cloud. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLZ and Cloud.
Diversification Opportunities for BLZ and Cloud
Very good diversification
The 3 months correlation between BLZ and Cloud is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloud and BLZ 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 BLZ are associated (or correlated) with Cloud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloud has no effect on the direction of BLZ i.e., BLZ and Cloud go up and down completely randomly.
Pair Corralation between BLZ and Cloud
Assuming the 90 days trading horizon BLZ is expected to generate 1.51 times less return on investment than Cloud. But when comparing it to its historical volatility, BLZ is 1.67 times less risky than Cloud. It trades about 0.21 of its potential returns per unit of risk. Cloud is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 34.00 in Cloud on August 28, 2024 and sell it today you would earn a total of 13.00 from holding Cloud or generate 38.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BLZ vs. Cloud
Performance |
| Timeline |
| BLZ |
| Cloud |
BLZ and Cloud Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BLZ and Cloud
The main advantage of trading using opposite BLZ and Cloud positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLZ position performs unexpectedly, Cloud 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 Cloud will offset losses from the drop in Cloud's long position.The idea behind BLZ and Cloud 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.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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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