Correlation Between BLZ and Beldex

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

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

Diversification Opportunities for BLZ and Beldex

0.67

Correlation Coefficient

BLZ  Beldex

Poor diversification

The 3 months correlation between BLZ and Beldex is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and Beldex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beldex and BLZ 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 BLZ are associated (or correlated) with Beldex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beldex has no effect on the direction of BLZ i.e., BLZ and Beldex go up and down completely randomly.

Pair Corralation between BLZ and Beldex

Assuming the 90 days trading horizon BLZ is expected to generate 11.57 times more return on investment than Beldex. However, BLZ is 11.57 times more volatile than Beldex. It trades about 0.0 of its potential returns per unit of risk. Beldex is currently generating about -0.06 per unit of risk. If you would invest  5.40  in BLZ on December 29, 2024 and sell it today you would lose (2.08) from holding BLZ or give up 38.52% of portfolio value over 90 days.

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

BLZ  vs.  Beldex

BLZ

Risk-Adjusted Performance

Very Weak

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

Beldex

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BLZ and Beldex

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

The idea behind BLZ and Beldex 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.