Correlation Between BLZ and CMT
Can any of the company-specific risk be diversified away by investing in both BLZ and CMT 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 CMT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BLZ and CMT, you can compare the effects of market volatilities on BLZ and CMT 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 CMT. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLZ and CMT.
Diversification Opportunities for BLZ and CMT
Very good diversification
The 3 months correlation between BLZ and CMT is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and CMT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMT 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 CMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMT has no effect on the direction of BLZ i.e., BLZ and CMT go up and down completely randomly.
Pair Corralation between BLZ and CMT
Assuming the 90 days trading horizon BLZ is expected to generate 1.97 times less return on investment than CMT. In addition to that, BLZ is 1.39 times more volatile than CMT. It trades about 0.16 of its total potential returns per unit of risk. CMT is currently generating about 0.43 per unit of volatility. If you would invest 0.53 in CMT on August 25, 2024 and sell it today you would earn a total of 0.25 from holding CMT or generate 46.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BLZ vs. CMT
Performance |
| Timeline |
| BLZ |
| CMT |
BLZ and CMT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BLZ and CMT
The main advantage of trading using opposite BLZ and CMT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLZ position performs unexpectedly, CMT 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 CMT will offset losses from the drop in CMT's long position.The idea behind BLZ and CMT 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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