Correlation Between Blue Star and Life Science

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

By analyzing existing cross correlation between Blue Star Capital and Life Science REIT, you can compare the effects of market volatilities on Blue Star and Life Science 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 Star with a short position of Life Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Star and Life Science.

Diversification Opportunities for Blue Star and Life Science

-0.18

Correlation Coefficient

Blue Star  Life Science

Good diversification

The 3 months correlation between Blue and Life is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Capital and Life Science REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Science REIT and Blue Star 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 Star Capital are associated (or correlated) with Life Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Science REIT has no effect on the direction of Blue Star i.e., Blue Star and Life Science go up and down completely randomly.

Pair Corralation between Blue Star and Life Science

Assuming the 90 days trading horizon Blue Star Capital is expected to generate 170.5 times more return on investment than Life Science. However, Blue Star is 170.5 times more volatile than Life Science REIT. It trades about 0.2 of its potential returns per unit of risk. Life Science REIT is currently generating about -0.34 per unit of risk. If you would invest  350.00  in Blue Star Capital on October 12, 2024 and sell it today you would lose (100.00) from holding Blue Star Capital or give up 28.57% of portfolio value over 90 days.

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

Blue Star Capital  vs.  Life Science REIT

Blue Star Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Star Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Blue Star exhibited solid returns over the last few months and may actually be approaching a breakup point.

Life Science REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Science REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Blue Star and Life Science

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

The idea behind Blue Star Capital and Life Science REIT 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.