Correlation Between BLZ and MITH
Can any of the company-specific risk be diversified away by investing in both BLZ and MITH 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 MITH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BLZ and MITH, you can compare the effects of market volatilities on BLZ and MITH 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 MITH. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLZ and MITH.
Diversification Opportunities for BLZ and MITH
Average diversification
The 3 months correlation between BLZ and MITH is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and MITH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITH 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 MITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITH has no effect on the direction of BLZ i.e., BLZ and MITH go up and down completely randomly.
Pair Corralation between BLZ and MITH
Assuming the 90 days trading horizon BLZ is expected to generate 31.8 times less return on investment than MITH. But when comparing it to its historical volatility, BLZ is 49.19 times less risky than MITH. It trades about 0.43 of its potential returns per unit of risk. MITH is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 0.02 in MITH on September 2, 2024 and sell it today you would earn a total of 0.01 from holding MITH or generate 29.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BLZ vs. MITH
Performance |
| Timeline |
| BLZ |
| MITH |
BLZ and MITH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BLZ and MITH
The main advantage of trading using opposite BLZ and MITH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLZ position performs unexpectedly, MITH 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 MITH will offset losses from the drop in MITH's long position.The idea behind BLZ and MITH 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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