Correlation Between Blue Earth and Wialan Technologies

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

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

Diversification Opportunities for Blue Earth and Wialan Technologies

0.23

Correlation Coefficient

Blue Earth  Wialan Technologies

Modest diversification

The 3 months correlation between Blue and Wialan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Blue Earth Resources and Wialan Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wialan Technologies and Blue Earth 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 Blue Earth Resources are associated (or correlated) with Wialan Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wialan Technologies has no effect on the direction of Blue Earth i.e., Blue Earth and Wialan Technologies go up and down completely randomly.

Pair Corralation between Blue Earth and Wialan Technologies

Given the investment horizon of 90 days Blue Earth Resources is expected to generate 2.08 times more return on investment than Wialan Technologies. However, Blue Earth is 2.08 times more volatile than Wialan Technologies. It trades about 0.06 of its potential returns per unit of risk. Wialan Technologies is currently generating about 0.01 per unit of risk. If you would invest  3.50  in Blue Earth Resources on December 19, 2024 and sell it today you would lose (0.70) from holding Blue Earth Resources or give up 20.0% of portfolio value over 90 days.

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

Blue Earth Resources  vs.  Wialan Technologies

Blue Earth Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Earth Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Blue Earth demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Wialan Technologies

Risk-Adjusted Performance

Weak

Over the last 90 days Wialan Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wialan Technologies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Blue Earth and Wialan Technologies

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

The idea behind Blue Earth Resources and Wialan Technologies 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.