Correlation Between Theta Fuel and BLZ
Can any of the company-specific risk be diversified away by investing in both Theta Fuel 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 Theta Fuel and BLZ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Theta Fuel and BLZ, you can compare the effects of market volatilities on Theta Fuel 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 Theta Fuel with a short position of BLZ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Theta Fuel and BLZ.
Diversification Opportunities for Theta Fuel and BLZ
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Theta and BLZ is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Theta Fuel and BLZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLZ and Theta Fuel 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 Theta Fuel 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 Theta Fuel i.e., Theta Fuel and BLZ go up and down completely randomly.
Pair Corralation between Theta Fuel and BLZ
Assuming the 90 days trading horizon Theta Fuel is expected to generate 1.48 times more return on investment than BLZ. However, Theta Fuel is 1.48 times more volatile than BLZ. It trades about 0.05 of its potential returns per unit of risk. BLZ is currently generating about 0.06 per unit of risk. If you would invest 4.43 in Theta Fuel on August 28, 2024 and sell it today you would earn a total of 3.44 from holding Theta Fuel or generate 77.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 57.42% |
| Values | Daily Returns |
Theta Fuel vs. BLZ
Performance |
| Timeline |
| Theta Fuel |
| BLZ |
Theta Fuel and BLZ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Theta Fuel and BLZ
The main advantage of trading using opposite Theta Fuel and BLZ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Theta Fuel 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 Theta Fuel 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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