Correlation Between Blue Water and Eco Innovation

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

By analyzing existing cross correlation between Blue Water Ventures and Eco Innovation Group, you can compare the effects of market volatilities on Blue Water and Eco Innovation 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 Water with a short position of Eco Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Water and Eco Innovation.

Diversification Opportunities for Blue Water and Eco Innovation

0.05

Correlation Coefficient

Blue Water  Eco Innovation

Significant diversification

The 3 months correlation between Blue and Eco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Blue Water Ventures and Eco Innovation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Innovation Group and Blue Water 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 Water Ventures are associated (or correlated) with Eco Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Innovation Group has no effect on the direction of Blue Water i.e., Blue Water and Eco Innovation go up and down completely randomly.

Pair Corralation between Blue Water and Eco Innovation

Given the investment horizon of 90 days Blue Water Ventures is expected to under-perform the Eco Innovation. But the pink sheet apears to be less risky and, when comparing its historical volatility, Blue Water Ventures is 13.46 times less risky than Eco Innovation. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Eco Innovation Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Eco Innovation Group on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Eco Innovation Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Blue Water Ventures  vs.  Eco Innovation Group

Blue Water Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Water Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Eco Innovation Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eco Innovation Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Eco Innovation showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Water and Eco Innovation

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

The idea behind Blue Water Ventures and Eco Innovation Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.