Correlation Between Buildablock Corp and Gemz Corp

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

By analyzing existing cross correlation between Buildablock Corp and Gemz Corp, you can compare the effects of market volatilities on Buildablock Corp and Gemz Corp 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 Buildablock Corp with a short position of Gemz Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buildablock Corp and Gemz Corp.

Diversification Opportunities for Buildablock Corp and Gemz Corp

0.2

Correlation Coefficient

Buildablock Corp  Gemz Corp

Modest diversification

The 3 months correlation between Buildablock and Gemz is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Buildablock Corp and Gemz Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemz Corp and Buildablock Corp 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 Buildablock Corp are associated (or correlated) with Gemz Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemz Corp has no effect on the direction of Buildablock Corp i.e., Buildablock Corp and Gemz Corp go up and down completely randomly.

Pair Corralation between Buildablock Corp and Gemz Corp

Given the investment horizon of 90 days Buildablock Corp is expected to generate 15.38 times more return on investment than Gemz Corp. However, Buildablock Corp is 15.38 times more volatile than Gemz Corp. It trades about 0.34 of its potential returns per unit of risk. Gemz Corp is currently generating about 0.08 per unit of risk. If you would invest  1.84  in Buildablock Corp on October 3, 2024 and sell it today you would earn a total of  58.16  from holding Buildablock Corp or generate 3160.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.27%
Values	Daily Returns

Buildablock Corp  vs.  Gemz Corp

Buildablock Corp

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Buildablock Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite sluggish fundamental drivers, Buildablock Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Gemz Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gemz Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gemz Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Buildablock Corp and Gemz Corp

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

The idea behind Buildablock Corp and Gemz Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .