Correlation Between Blumar and Cuprum

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

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

Diversification Opportunities for Blumar and Cuprum

-0.03

Correlation Coefficient

Blumar  Cuprum

Good diversification

The 3 months correlation between Blumar and Cuprum is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Blumar and Cuprum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cuprum and Blumar 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 Blumar are associated (or correlated) with Cuprum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cuprum has no effect on the direction of Blumar i.e., Blumar and Cuprum go up and down completely randomly.

Pair Corralation between Blumar and Cuprum

Assuming the 90 days trading horizon Blumar is expected to under-perform the Cuprum. But the stock apears to be less risky and, when comparing its historical volatility, Blumar is 1.27 times less risky than Cuprum. The stock trades about -0.41 of its potential returns per unit of risk. The Cuprum is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  4,684  in Cuprum on September 5, 2024 and sell it today you would earn a total of  595.00  from holding Cuprum or generate 12.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.09%
Values	Daily Returns

Blumar  vs.  Cuprum

Blumar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blumar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cuprum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cuprum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cuprum is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blumar and Cuprum

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

The idea behind Blumar and Cuprum 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.