Correlation Between BLZ and YAM

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

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

Diversification Opportunities for BLZ and YAM

0.34

Correlation Coefficient

BLZ  YAM

Weak diversification

The 3 months correlation between BLZ and YAM is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and YAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YAM 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 YAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YAM has no effect on the direction of BLZ i.e., BLZ and YAM go up and down completely randomly.

Pair Corralation between BLZ and YAM

Assuming the 90 days trading horizon BLZ is expected to generate 47.25 times less return on investment than YAM. But when comparing it to its historical volatility, BLZ is 1.51 times less risky than YAM. It trades about 0.0 of its potential returns per unit of risk. YAM is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.57  in YAM on December 27, 2024 and sell it today you would lose (1.47) from holding YAM or give up 41.18% of portfolio value over 90 days.

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

BLZ  vs.  YAM

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.

YAM

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YAM are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, YAM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BLZ and YAM

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

The idea behind BLZ and YAM 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.