Correlation Between Wialan Technologies and Blue Earth

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

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

Diversification Opportunities for Wialan Technologies and Blue Earth

0.23

Correlation Coefficient

Wialan Technologies  Blue Earth

Modest diversification

The 3 months correlation between Wialan and Blue is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Wialan Technologies and Blue Earth Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Earth Resources and Wialan Technologies 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 Wialan Technologies are associated (or correlated) with Blue Earth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Earth Resources has no effect on the direction of Wialan Technologies i.e., Wialan Technologies and Blue Earth go up and down completely randomly.

Pair Corralation between Wialan Technologies and Blue Earth

Given the investment horizon of 90 days Wialan Technologies is expected to generate 16.24 times less return on investment than Blue Earth. But when comparing it to its historical volatility, Wialan Technologies is 2.08 times less risky than Blue Earth. It trades about 0.01 of its potential returns per unit of risk. Blue Earth Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Blue Earth Resources on December 19, 2024 and sell it today you would lose (0.70) from holding Blue Earth Resources or give up 20.0% of portfolio value over 90 days.

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

Wialan Technologies  vs.  Blue Earth Resources

Wialan Technologies

Risk-Adjusted Performance

Weak

Over the last 90 days Wialan Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wialan Technologies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Blue Earth Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Earth Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Blue Earth demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wialan Technologies and Blue Earth

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

The idea behind Wialan Technologies and Blue Earth Resources 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.