Correlation Between Blumar and Salfacorp

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

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

Diversification Opportunities for Blumar and Salfacorp

-0.75

Correlation Coefficient

Blumar  Salfacorp

Pay attention - limited upside

The 3 months correlation between Blumar and Salfacorp is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Blumar and Salfacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salfacorp 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 Salfacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salfacorp has no effect on the direction of Blumar i.e., Blumar and Salfacorp go up and down completely randomly.

Pair Corralation between Blumar and Salfacorp

Assuming the 90 days trading horizon Blumar is expected to under-perform the Salfacorp. But the stock apears to be less risky and, when comparing its historical volatility, Blumar is 1.69 times less risky than Salfacorp. The stock trades about -0.22 of its potential returns per unit of risk. The Salfacorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  51,924  in Salfacorp on September 5, 2024 and sell it today you would earn a total of  3,722  from holding Salfacorp or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	31.67%
Values	Daily Returns

Blumar  vs.  Salfacorp

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.

Salfacorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Salfacorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Blumar and Salfacorp

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

The idea behind Blumar and Salfacorp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.