Correlation Between Salfacorp and Blumar

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

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

Diversification Opportunities for Salfacorp and Blumar

-0.75

Correlation Coefficient

Salfacorp  Blumar

Pay attention - limited upside

The 3 months correlation between Salfacorp and Blumar is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Salfacorp and Blumar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blumar and Salfacorp 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 Salfacorp are associated (or correlated) with Blumar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blumar has no effect on the direction of Salfacorp i.e., Salfacorp and Blumar go up and down completely randomly.

Pair Corralation between Salfacorp and Blumar

Assuming the 90 days trading horizon Salfacorp is expected to generate 2.97 times more return on investment than Blumar. However, Salfacorp is 2.97 times more volatile than Blumar. It trades about 0.1 of its potential returns per unit of risk. Blumar is currently generating about -0.06 per unit of risk. If you would invest  51,924  in Salfacorp on September 5, 2024 and sell it today you would earn a total of  3,722  from holding Salfacorp or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	31.67%
Values	Daily Returns

Salfacorp  vs.  Blumar

Salfacorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Salfacorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blumar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blumar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Blumar is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salfacorp and Blumar

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

The idea behind Salfacorp and Blumar 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.