Correlation Between Hexcel and Blue Line

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

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

Diversification Opportunities for Hexcel and Blue Line

0.37

Correlation Coefficient

Hexcel  Blue Line

Weak diversification

The 3 months correlation between Hexcel and Blue is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and Blue Line Protection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Line Protection and Hexcel 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 Hexcel are associated (or correlated) with Blue Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Line Protection has no effect on the direction of Hexcel i.e., Hexcel and Blue Line go up and down completely randomly.

Pair Corralation between Hexcel and Blue Line

Considering the 90-day investment horizon Hexcel is expected to under-perform the Blue Line. But the stock apears to be less risky and, when comparing its historical volatility, Hexcel is 5.97 times less risky than Blue Line. The stock trades about -0.07 of its potential returns per unit of risk. The Blue Line Protection is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5.51  in Blue Line Protection on December 20, 2024 and sell it today you would earn a total of  1.17  from holding Blue Line Protection or generate 21.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Hexcel  vs.  Blue Line Protection

Hexcel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hexcel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Blue Line Protection

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Line Protection are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Blue Line reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hexcel and Blue Line

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

The idea behind Hexcel and Blue Line Protection 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.