Correlation Between West Red and Blue Star

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

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

Diversification Opportunities for West Red and Blue Star

0.42

Correlation Coefficient

West Red  Blue Star

Very weak diversification

The 3 months correlation between West and Blue is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding West Red Lake and Blue Star Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Star Gold and West Red 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 West Red Lake are associated (or correlated) with Blue Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Star Gold has no effect on the direction of West Red i.e., West Red and Blue Star go up and down completely randomly.

Pair Corralation between West Red and Blue Star

Assuming the 90 days horizon West Red Lake is expected to under-perform the Blue Star. But the otc stock apears to be less risky and, when comparing its historical volatility, West Red Lake is 1.41 times less risky than Blue Star. The otc stock trades about -0.09 of its potential returns per unit of risk. The Blue Star Gold is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3.58  in Blue Star Gold on October 22, 2024 and sell it today you would lose (0.33) from holding Blue Star Gold or give up 9.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

West Red Lake  vs.  Blue Star Gold

West Red Lake

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West Red Lake has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Blue Star Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Star Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Blue Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with West Red and Blue Star

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

The idea behind West Red Lake and Blue Star Gold 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.