Correlation Between Bridgeline Digital and Fuse Science

Can any of the company-specific risk be diversified away by investing in both Bridgeline Digital and Fuse Science 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 Bridgeline Digital and Fuse Science into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bridgeline Digital and Fuse Science, you can compare the effects of market volatilities on Bridgeline Digital and Fuse Science 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 Bridgeline Digital with a short position of Fuse Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgeline Digital and Fuse Science.

Diversification Opportunities for Bridgeline Digital and Fuse Science

-0.22

Correlation Coefficient

Bridgeline Digital  Fuse Science

Very good diversification

The 3 months correlation between Bridgeline and Fuse is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bridgeline Digital and Fuse Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuse Science and Bridgeline Digital 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 Bridgeline Digital are associated (or correlated) with Fuse Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuse Science has no effect on the direction of Bridgeline Digital i.e., Bridgeline Digital and Fuse Science go up and down completely randomly.

Pair Corralation between Bridgeline Digital and Fuse Science

Given the investment horizon of 90 days Bridgeline Digital is expected to generate 11.88 times less return on investment than Fuse Science. But when comparing it to its historical volatility, Bridgeline Digital is 9.38 times less risky than Fuse Science. It trades about 0.1 of its potential returns per unit of risk. Fuse Science is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.43  in Fuse Science on August 30, 2024 and sell it today you would earn a total of  0.28  from holding Fuse Science or generate 65.12% return on investment over 90 days.

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

Bridgeline Digital  vs.  Fuse Science

Bridgeline Digital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgeline Digital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Bridgeline Digital displayed solid returns over the last few months and may actually be approaching a breakup point.

Fuse Science

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fuse Science are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fuse Science reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bridgeline Digital and Fuse Science

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

The idea behind Bridgeline Digital and Fuse Science 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.