Correlation Between BLZ and SRN

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

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

Diversification Opportunities for BLZ and SRN

0.41

Correlation Coefficient

BLZ  SRN

Very weak diversification

The 3 months correlation between BLZ and SRN is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and SRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SRN 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 SRN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SRN has no effect on the direction of BLZ i.e., BLZ and SRN go up and down completely randomly.

Pair Corralation between BLZ and SRN

Assuming the 90 days trading horizon BLZ is expected to generate 5.65 times more return on investment than SRN. However, BLZ is 5.65 times more volatile than SRN. It trades about 0.0 of its potential returns per unit of risk. SRN is currently generating about -0.03 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.  SRN

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.

SRN

Risk-Adjusted Performance

Very Weak

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

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

The idea behind BLZ and SRN 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.