Correlation Between BLZ and CND

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

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

Diversification Opportunities for BLZ and CND

0.48

Correlation Coefficient

BLZ  CND

Very weak diversification

The 3 months correlation between BLZ and CND is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and CND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CND 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 CND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CND has no effect on the direction of BLZ i.e., BLZ and CND go up and down completely randomly.

Pair Corralation between BLZ and CND

Assuming the 90 days trading horizon BLZ is expected to generate 5.66 times more return on investment than CND. However, BLZ is 5.66 times more volatile than CND. It trades about 0.0 of its potential returns per unit of risk. CND is currently generating about 0.0 per unit of risk. If you would invest  5.40  in BLZ on December 28, 2024 and sell it today you would lose (1.95) from holding BLZ or give up 36.11% of portfolio value over 90 days.

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

BLZ  vs.  CND

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.

CND

Risk-Adjusted Performance

Very Weak

Over the last 90 days CND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, CND 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 CND

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

The idea behind BLZ and CND 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.