Correlation Between BluMetric Environmental and EcoPlus

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

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

Diversification Opportunities for BluMetric Environmental and EcoPlus

0.25

Correlation Coefficient

BluMetric Environmental  EcoPlus

Modest diversification

The 3 months correlation between BluMetric and EcoPlus is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding BluMetric Environmental and EcoPlus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EcoPlus and BluMetric Environmental 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 BluMetric Environmental are associated (or correlated) with EcoPlus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EcoPlus has no effect on the direction of BluMetric Environmental i.e., BluMetric Environmental and EcoPlus go up and down completely randomly.

Pair Corralation between BluMetric Environmental and EcoPlus

Assuming the 90 days horizon BluMetric Environmental is expected to generate 9.64 times less return on investment than EcoPlus. But when comparing it to its historical volatility, BluMetric Environmental is 7.27 times less risky than EcoPlus. It trades about 0.07 of its potential returns per unit of risk. EcoPlus is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3.10  in EcoPlus on October 11, 2024 and sell it today you would lose (1.80) from holding EcoPlus or give up 58.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.59%
Values	Daily Returns

BluMetric Environmental  vs.  EcoPlus

BluMetric Environmental

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days BluMetric Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, BluMetric Environmental reported solid returns over the last few months and may actually be approaching a breakup point.

EcoPlus

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EcoPlus are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, EcoPlus disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BluMetric Environmental and EcoPlus

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

The idea behind BluMetric Environmental and EcoPlus 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.