Correlation Between Blue Star and John Wood

Can any of the company-specific risk be diversified away by investing in both Blue Star and John Wood 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 John Wood 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 John Wood Group, you can compare the effects of market volatilities on Blue Star and John Wood 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 John Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Star and John Wood.

Diversification Opportunities for Blue Star and John Wood

0.22

Correlation Coefficient

Blue Star  John Wood

Modest diversification

The 3 months correlation between Blue and John is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Capital and John Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Wood Group 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 John Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Wood Group has no effect on the direction of Blue Star i.e., Blue Star and John Wood go up and down completely randomly.

Pair Corralation between Blue Star and John Wood

Assuming the 90 days trading horizon Blue Star Capital is expected to generate 0.87 times more return on investment than John Wood. However, Blue Star Capital is 1.15 times less risky than John Wood. It trades about 0.01 of its potential returns per unit of risk. John Wood Group is currently generating about -0.05 per unit of risk. If you would invest  2.00  in Blue Star Capital on September 13, 2024 and sell it today you would lose (0.25) from holding Blue Star Capital or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Blue Star Capital  vs.  John Wood Group

Blue Star Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Star Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Blue Star is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

John Wood Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John Wood Group 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Blue Star and John Wood

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

The idea behind Blue Star Capital and John Wood Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.