Correlation Between BLZ and CREAM

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

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

Diversification Opportunities for BLZ and CREAM

0.71

Correlation Coefficient

BLZ  CREAM

Poor diversification

The 3 months correlation between BLZ and CREAM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and CREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CREAM 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 CREAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CREAM has no effect on the direction of BLZ i.e., BLZ and CREAM go up and down completely randomly.

Pair Corralation between BLZ and CREAM

Assuming the 90 days trading horizon BLZ is expected to under-perform the CREAM. In addition to that, BLZ is 1.14 times more volatile than CREAM. It trades about 0.0 of its total potential returns per unit of risk. CREAM is currently generating about 0.05 per unit of volatility. If you would invest  1,071  in CREAM on December 29, 2024 and sell it today you would earn a total of  2.00  from holding CREAM or generate 0.19% return on investment over 90 days.

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

BLZ  vs.  CREAM

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.

CREAM

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CREAM are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, CREAM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BLZ and CREAM

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

The idea behind BLZ and CREAM 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.