Correlation Between MLN and BLZ
Can any of the company-specific risk be diversified away by investing in both MLN and BLZ 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 MLN and BLZ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MLN and BLZ, you can compare the effects of market volatilities on MLN and BLZ 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 MLN with a short position of BLZ. Check out your portfolio center. Please also check ongoing floating volatility patterns of MLN and BLZ.
Diversification Opportunities for MLN and BLZ
Very weak diversification
The 3 months correlation between MLN and BLZ is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding MLN and BLZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLZ and MLN 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 MLN are associated (or correlated) with BLZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLZ has no effect on the direction of MLN i.e., MLN and BLZ go up and down completely randomly.
Pair Corralation between MLN and BLZ
Assuming the 90 days trading horizon MLN is expected to generate 0.61 times more return on investment than BLZ. However, MLN is 1.65 times less risky than BLZ. It trades about -0.29 of its potential returns per unit of risk. BLZ is currently generating about -0.18 per unit of risk. If you would invest 1,809 in MLN on November 10, 2024 and sell it today you would lose (472.00) from holding MLN or give up 26.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
MLN vs. BLZ
Performance |
| Timeline |
| MLN |
| BLZ |
MLN and BLZ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MLN and BLZ
The main advantage of trading using opposite MLN and BLZ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MLN position performs unexpectedly, BLZ 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 BLZ will offset losses from the drop in BLZ's long position.The idea behind MLN and BLZ 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |