Correlation Between Threes Company and Blue Sail

Can any of the company-specific risk be diversified away by investing in both Threes Company and Blue Sail 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 Threes Company and Blue Sail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Threes Company Media and Blue Sail Medical, you can compare the effects of market volatilities on Threes Company and Blue Sail 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 Threes Company with a short position of Blue Sail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Threes Company and Blue Sail.

Diversification Opportunities for Threes Company and Blue Sail

0.53

Correlation Coefficient

Threes Company  Blue Sail

Very weak diversification

The 3 months correlation between Threes and Blue is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Threes Company Media and Blue Sail Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Sail Medical and Threes Company 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 Threes Company Media are associated (or correlated) with Blue Sail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Sail Medical has no effect on the direction of Threes Company i.e., Threes Company and Blue Sail go up and down completely randomly.

Pair Corralation between Threes Company and Blue Sail

Assuming the 90 days trading horizon Threes Company Media is expected to generate 2.7 times more return on investment than Blue Sail. However, Threes Company is 2.7 times more volatile than Blue Sail Medical. It trades about -0.13 of its potential returns per unit of risk. Blue Sail Medical is currently generating about -0.45 per unit of risk. If you would invest  3,634  in Threes Company Media on October 6, 2024 and sell it today you would lose (465.00) from holding Threes Company Media or give up 12.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Threes Company Media  vs.  Blue Sail Medical

Threes Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Threes Company Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Threes Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blue Sail Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Sail Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Threes Company and Blue Sail

The main advantage of trading using opposite Threes Company and Blue Sail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Threes Company position performs unexpectedly, Blue Sail 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 Blue Sail will offset losses from the drop in Blue Sail's long position.

The idea behind Threes Company Media and Blue Sail Medical 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.