Correlation Between Blue Moon and Safety Shot

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

By analyzing existing cross correlation between Blue Moon Metals and Safety Shot, you can compare the effects of market volatilities on Blue Moon and Safety Shot 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 Blue Moon with a short position of Safety Shot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Moon and Safety Shot.

Diversification Opportunities for Blue Moon and Safety Shot

-0.66

Correlation Coefficient

Blue Moon  Safety Shot

Excellent diversification

The 3 months correlation between Blue and Safety is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Blue Moon Metals and Safety Shot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Shot and Blue Moon 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 Blue Moon Metals are associated (or correlated) with Safety Shot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Shot has no effect on the direction of Blue Moon i.e., Blue Moon and Safety Shot go up and down completely randomly.

Pair Corralation between Blue Moon and Safety Shot

Assuming the 90 days horizon Blue Moon is expected to generate 17.3 times less return on investment than Safety Shot. But when comparing it to its historical volatility, Blue Moon Metals is 26.06 times less risky than Safety Shot. It trades about 0.22 of its potential returns per unit of risk. Safety Shot is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Safety Shot on September 27, 2024 and sell it today you would earn a total of  3.99  from holding Safety Shot or generate 30.69% return on investment over 90 days.

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

Blue Moon Metals  vs.  Safety Shot

Blue Moon Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Moon Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Blue Moon reported solid returns over the last few months and may actually be approaching a breakup point.

Safety Shot

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Blue Moon and Safety Shot

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

The idea behind Blue Moon Metals and Safety Shot 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.