Correlation Between Blue Jet and Paramount Communications

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

By analyzing existing cross correlation between Blue Jet Healthcare and Paramount Communications Limited, you can compare the effects of market volatilities on Blue Jet and Paramount Communications 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 Jet with a short position of Paramount Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Jet and Paramount Communications.

Diversification Opportunities for Blue Jet and Paramount Communications

0.01

Correlation Coefficient

Blue Jet  Paramount Communications

Significant diversification

The 3 months correlation between Blue and Paramount is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Blue Jet Healthcare and Paramount Communications Limit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Communications and Blue Jet 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 Jet Healthcare are associated (or correlated) with Paramount Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Communications has no effect on the direction of Blue Jet i.e., Blue Jet and Paramount Communications go up and down completely randomly.

Pair Corralation between Blue Jet and Paramount Communications

Assuming the 90 days trading horizon Blue Jet Healthcare is expected to generate 0.86 times more return on investment than Paramount Communications. However, Blue Jet Healthcare is 1.17 times less risky than Paramount Communications. It trades about -0.01 of its potential returns per unit of risk. Paramount Communications Limited is currently generating about -0.06 per unit of risk. If you would invest  52,550  in Blue Jet Healthcare on September 18, 2024 and sell it today you would lose (2,075) from holding Blue Jet Healthcare or give up 3.95% of portfolio value over 90 days.

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

Blue Jet Healthcare  vs.  Paramount Communications Limit

Blue Jet Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Jet Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking indicators, Blue Jet is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Paramount Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Blue Jet and Paramount Communications

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

The idea behind Blue Jet Healthcare and Paramount Communications Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.