Correlation Between RIV Capital and BZAM

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

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

Diversification Opportunities for RIV Capital and BZAM

0.35

Correlation Coefficient

RIV Capital  BZAM

Weak diversification

The 3 months correlation between RIV and BZAM is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding RIV Capital and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM and RIV Capital 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 RIV Capital are associated (or correlated) with BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of RIV Capital i.e., RIV Capital and BZAM go up and down completely randomly.

Pair Corralation between RIV Capital and BZAM

Assuming the 90 days horizon RIV Capital is expected to under-perform the BZAM. But the pink sheet apears to be less risky and, when comparing its historical volatility, RIV Capital is 24.18 times less risky than BZAM. The pink sheet trades about -0.01 of its potential returns per unit of risk. The BZAM is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.50  in BZAM on September 3, 2024 and sell it today you would lose (2.50) from holding BZAM or give up 100.0% of portfolio value over 90 days.

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

RIV Capital  vs.  BZAM

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, RIV Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BZAM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RIV Capital and BZAM

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

The idea behind RIV Capital and BZAM 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.