Correlation Between EZFL Old and BHPA

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

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

Diversification Opportunities for EZFL Old and BHPA

0.09

Correlation Coefficient

EZFL Old  BHPA

Significant diversification

The 3 months correlation between EZFL and BHPA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding EZFL Old and BHPA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHPA Inc and EZFL Old 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 EZFL Old are associated (or correlated) with BHPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHPA Inc has no effect on the direction of EZFL Old i.e., EZFL Old and BHPA go up and down completely randomly.

Pair Corralation between EZFL Old and BHPA

Given the investment horizon of 90 days EZFL Old is expected to generate 3.83 times less return on investment than BHPA. But when comparing it to its historical volatility, EZFL Old is 2.11 times less risky than BHPA. It trades about 0.04 of its potential returns per unit of risk. BHPA Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.30  in BHPA Inc on December 27, 2024 and sell it today you would earn a total of  0.00  from holding BHPA Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.0%
Values	Daily Returns

EZFL Old  vs.  BHPA Inc

EZFL Old

Risk-Adjusted Performance

Insignificant

Over the last 90 days EZFL Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite conflicting technical and fundamental indicators, EZFL Old disclosed solid returns over the last few months and may actually be approaching a breakup point.

BHPA Inc

Risk-Adjusted Performance

Modest

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

Pair Trading with EZFL Old and BHPA

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

The idea behind EZFL Old and BHPA Inc 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.