Correlation Between Bloom Select and Mawer Equity

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

By analyzing existing cross correlation between Bloom Select Income and Mawer Equity A, you can compare the effects of market volatilities on Bloom Select and Mawer Equity 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 Bloom Select with a short position of Mawer Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloom Select and Mawer Equity.

Diversification Opportunities for Bloom Select and Mawer Equity

0.15

Correlation Coefficient

Bloom Select  Mawer Equity

Average diversification

The 3 months correlation between Bloom and Mawer is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Select Income and Mawer Equity A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mawer Equity A and Bloom Select 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 Bloom Select Income are associated (or correlated) with Mawer Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mawer Equity A has no effect on the direction of Bloom Select i.e., Bloom Select and Mawer Equity go up and down completely randomly.

Pair Corralation between Bloom Select and Mawer Equity

Assuming the 90 days trading horizon Bloom Select Income is expected to under-perform the Mawer Equity. In addition to that, Bloom Select is 1.08 times more volatile than Mawer Equity A. It trades about -0.04 of its total potential returns per unit of risk. Mawer Equity A is currently generating about -0.01 per unit of volatility. If you would invest  10,434  in Mawer Equity A on December 1, 2024 and sell it today you would lose (81.00) from holding Mawer Equity A or give up 0.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Bloom Select Income  vs.  Mawer Equity A

Bloom Select Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bloom Select Income has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental drivers, Bloom Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mawer Equity A

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Bloom Select and Mawer Equity

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

The idea behind Bloom Select Income and Mawer Equity A 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.