Correlation Between Current Water and BluMetric Environmental

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

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

Diversification Opportunities for Current Water and BluMetric Environmental

-0.51

Correlation Coefficient

Current Water  BluMetric Environmental

Excellent diversification

The 3 months correlation between Current and BluMetric is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Current Water Technologies and BluMetric Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BluMetric Environmental and Current Water 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 Current Water Technologies are associated (or correlated) with BluMetric Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BluMetric Environmental has no effect on the direction of Current Water i.e., Current Water and BluMetric Environmental go up and down completely randomly.

Pair Corralation between Current Water and BluMetric Environmental

Assuming the 90 days trading horizon Current Water is expected to generate 1.1 times less return on investment than BluMetric Environmental. In addition to that, Current Water is 2.93 times more volatile than BluMetric Environmental. It trades about 0.04 of its total potential returns per unit of risk. BluMetric Environmental is currently generating about 0.13 per unit of volatility. If you would invest  87.00  in BluMetric Environmental on December 31, 2024 and sell it today you would earn a total of  31.00  from holding BluMetric Environmental or generate 35.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Current Water Technologies  vs.  BluMetric Environmental

Current Water Techno

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Current Water Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Current Water showed solid returns over the last few months and may actually be approaching a breakup point.

BluMetric Environmental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BluMetric Environmental are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, BluMetric Environmental showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Current Water and BluMetric Environmental

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

The idea behind Current Water Technologies and BluMetric Environmental 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.