Correlation Between Blue Coast and Prudent Corporate

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

By analyzing existing cross correlation between Blue Coast Hotels and Prudent Corporate Advisory, you can compare the effects of market volatilities on Blue Coast and Prudent Corporate 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 Coast with a short position of Prudent Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Coast and Prudent Corporate.

Diversification Opportunities for Blue Coast and Prudent Corporate

-0.39

Correlation Coefficient

Blue Coast  Prudent Corporate

Very good diversification

The 3 months correlation between Blue and Prudent is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Blue Coast Hotels and Prudent Corporate Advisory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudent Corporate and Blue Coast 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 Coast Hotels are associated (or correlated) with Prudent Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudent Corporate has no effect on the direction of Blue Coast i.e., Blue Coast and Prudent Corporate go up and down completely randomly.

Pair Corralation between Blue Coast and Prudent Corporate

Assuming the 90 days trading horizon Blue Coast is expected to generate 1.11 times less return on investment than Prudent Corporate. But when comparing it to its historical volatility, Blue Coast Hotels is 1.63 times less risky than Prudent Corporate. It trades about 0.15 of its potential returns per unit of risk. Prudent Corporate Advisory is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  242,100  in Prudent Corporate Advisory on September 24, 2024 and sell it today you would earn a total of  42,590  from holding Prudent Corporate Advisory or generate 17.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Blue Coast Hotels  vs.  Prudent Corporate Advisory

Blue Coast Hotels

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Coast Hotels are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Blue Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Prudent Corporate

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudent Corporate Advisory are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Prudent Corporate unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Coast and Prudent Corporate

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

The idea behind Blue Coast Hotels and Prudent Corporate Advisory 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.