Correlation Between Blue Sail and EmbedWay TechCorp

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

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

Diversification Opportunities for Blue Sail and EmbedWay TechCorp

0.58

Correlation Coefficient

Blue Sail  EmbedWay TechCorp

Very weak diversification

The 3 months correlation between Blue and EmbedWay is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sail Medical and EmbedWay TechCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EmbedWay TechCorp and Blue Sail 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 Blue Sail Medical are associated (or correlated) with EmbedWay TechCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EmbedWay TechCorp has no effect on the direction of Blue Sail i.e., Blue Sail and EmbedWay TechCorp go up and down completely randomly.

Pair Corralation between Blue Sail and EmbedWay TechCorp

Assuming the 90 days trading horizon Blue Sail Medical is expected to generate 0.66 times more return on investment than EmbedWay TechCorp. However, Blue Sail Medical is 1.51 times less risky than EmbedWay TechCorp. It trades about 0.06 of its potential returns per unit of risk. EmbedWay TechCorp is currently generating about 0.04 per unit of risk. If you would invest  489.00  in Blue Sail Medical on September 27, 2024 and sell it today you would earn a total of  33.00  from holding Blue Sail Medical or generate 6.75% return on investment over 90 days.

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

Blue Sail Medical  vs.  EmbedWay TechCorp

Blue Sail Medical

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sail Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Blue Sail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EmbedWay TechCorp

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EmbedWay TechCorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EmbedWay TechCorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Blue Sail and EmbedWay TechCorp

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

The idea behind Blue Sail Medical and EmbedWay TechCorp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .