Correlation Between Blue Star and Amex Exploration

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

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

Diversification Opportunities for Blue Star and Amex Exploration

0.2

Correlation Coefficient

Blue Star  Amex Exploration

Modest diversification

The 3 months correlation between Blue and Amex is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Gold and Amex Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amex Exploration and Blue Star 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 Star Gold are associated (or correlated) with Amex Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amex Exploration has no effect on the direction of Blue Star i.e., Blue Star and Amex Exploration go up and down completely randomly.

Pair Corralation between Blue Star and Amex Exploration

Assuming the 90 days horizon Blue Star Gold is expected to generate 2.45 times more return on investment than Amex Exploration. However, Blue Star is 2.45 times more volatile than Amex Exploration. It trades about -0.13 of its potential returns per unit of risk. Amex Exploration is currently generating about -0.41 per unit of risk. If you would invest  3.49  in Blue Star Gold on September 15, 2024 and sell it today you would lose (0.54) from holding Blue Star Gold or give up 15.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Blue Star Gold  vs.  Amex Exploration

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Amex Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Blue Star and Amex Exploration

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

The idea behind Blue Star Gold and Amex Exploration 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.