Correlation Between Blue Lagoon and Flutter Entertainment

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

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

Diversification Opportunities for Blue Lagoon and Flutter Entertainment

0.54

Correlation Coefficient

Blue Lagoon  Flutter Entertainment

Very weak diversification

The 3 months correlation between Blue and Flutter is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Blue Lagoon Resources and Flutter Entertainment plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment plc and Blue Lagoon 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 Lagoon Resources are associated (or correlated) with Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment plc has no effect on the direction of Blue Lagoon i.e., Blue Lagoon and Flutter Entertainment go up and down completely randomly.

Pair Corralation between Blue Lagoon and Flutter Entertainment

Assuming the 90 days horizon Blue Lagoon Resources is expected to generate 2.97 times more return on investment than Flutter Entertainment. However, Blue Lagoon is 2.97 times more volatile than Flutter Entertainment plc. It trades about 0.03 of its potential returns per unit of risk. Flutter Entertainment plc is currently generating about 0.07 per unit of risk. If you would invest  11.00  in Blue Lagoon Resources on October 6, 2024 and sell it today you would lose (2.40) from holding Blue Lagoon Resources or give up 21.82% of portfolio value over 90 days.

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

Blue Lagoon Resources  vs.  Flutter Entertainment plc

Blue Lagoon Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Lagoon Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Blue Lagoon reported solid returns over the last few months and may actually be approaching a breakup point.

Flutter Entertainment plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Flutter Entertainment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Blue Lagoon and Flutter Entertainment

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

The idea behind Blue Lagoon Resources and Flutter Entertainment plc 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 Stocks Directory module to find actively traded stocks across global markets.