Correlation Between BHPA and EZFL Old

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

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

Diversification Opportunities for BHPA and EZFL Old

0.09

Correlation Coefficient

BHPA  EZFL Old

Significant diversification

The 3 months correlation between BHPA and EZFL is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding BHPA Inc and EZFL Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZFL Old and BHPA 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 BHPA Inc are associated (or correlated) with EZFL Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZFL Old has no effect on the direction of BHPA i.e., BHPA and EZFL Old go up and down completely randomly.

Pair Corralation between BHPA and EZFL Old

Given the investment horizon of 90 days BHPA Inc is expected to generate 2.11 times more return on investment than EZFL Old. However, BHPA is 2.11 times more volatile than EZFL Old. It trades about 0.07 of its potential returns per unit of risk. EZFL Old is currently generating about 0.04 per unit of risk. If you would invest  0.30  in BHPA Inc on December 27, 2024 and sell it today you would earn a total of  0.00  from holding BHPA Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.0%
Values	Daily Returns

BHPA Inc  vs.  EZFL Old

BHPA Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BHPA Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BHPA sustained solid returns over the last few months and may actually be approaching a breakup point.

EZFL Old

Risk-Adjusted Performance

Insignificant

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

Pair Trading with BHPA and EZFL Old

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

The idea behind BHPA Inc and EZFL Old 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.