Correlation Between BLZ and PHB

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

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

Diversification Opportunities for BLZ and PHB

0.72

Correlation Coefficient

BLZ  PHB

Poor diversification

The 3 months correlation between BLZ and PHB is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and PHB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHB 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 PHB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHB has no effect on the direction of BLZ i.e., BLZ and PHB go up and down completely randomly.

Pair Corralation between BLZ and PHB

Assuming the 90 days trading horizon BLZ is expected to generate 2.2 times more return on investment than PHB. However, BLZ is 2.2 times more volatile than PHB. It trades about 0.01 of its potential returns per unit of risk. PHB is currently generating about -0.22 per unit of risk. If you would invest  5.46  in BLZ on December 27, 2024 and sell it today you would lose (1.78) from holding BLZ or give up 32.6% of portfolio value over 90 days.

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

BLZ  vs.  PHB

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 unsteady basic indicators, BLZ may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PHB

Risk-Adjusted Performance

Very Weak

Over the last 90 days PHB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for PHB shareholders.

Pair Trading with BLZ and PHB

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

The idea behind BLZ and PHB 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.