Correlation Between BLZ and THENA
Can any of the company-specific risk be diversified away by investing in both BLZ and THENA 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 THENA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BLZ and THENA, you can compare the effects of market volatilities on BLZ and THENA 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 THENA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLZ and THENA.
Diversification Opportunities for BLZ and THENA
Weak diversification
The 3 months correlation between BLZ and THENA is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and THENA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THENA 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 THENA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THENA has no effect on the direction of BLZ i.e., BLZ and THENA go up and down completely randomly.
Pair Corralation between BLZ and THENA
Assuming the 90 days trading horizon BLZ is expected to generate 0.68 times more return on investment than THENA. However, BLZ is 1.46 times less risky than THENA. It trades about -0.11 of its potential returns per unit of risk. THENA is currently generating about -0.3 per unit of risk. If you would invest 5.66 in BLZ on October 23, 2024 and sell it today you would lose (0.78) from holding BLZ or give up 13.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BLZ vs. THENA
Performance |
| Timeline |
| BLZ |
| THENA |
BLZ and THENA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BLZ and THENA
The main advantage of trading using opposite BLZ and THENA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLZ position performs unexpectedly, THENA 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 THENA will offset losses from the drop in THENA's long position.The idea behind BLZ and THENA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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