Correlation Between BLZ and GRS
Can any of the company-specific risk be diversified away by investing in both BLZ and GRS 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 GRS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BLZ and GRS, you can compare the effects of market volatilities on BLZ and GRS 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 GRS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLZ and GRS.
Diversification Opportunities for BLZ and GRS
Weak diversification
The 3 months correlation between BLZ and GRS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and GRS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRS 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 GRS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRS has no effect on the direction of BLZ i.e., BLZ and GRS go up and down completely randomly.
Pair Corralation between BLZ and GRS
Assuming the 90 days trading horizon BLZ is expected to generate 1.31 times less return on investment than GRS. But when comparing it to its historical volatility, BLZ is 1.13 times less risky than GRS. It trades about 0.31 of its potential returns per unit of risk. GRS is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 33.00 in GRS on September 1, 2024 and sell it today you would earn a total of 22.00 from holding GRS or generate 66.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BLZ vs. GRS
Performance |
| Timeline |
| BLZ |
| GRS |
BLZ and GRS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BLZ and GRS
The main advantage of trading using opposite BLZ and GRS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLZ position performs unexpectedly, GRS 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 GRS will offset losses from the drop in GRS's long position.The idea behind BLZ and GRS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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