Correlation Between BLZ and GRS

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

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

Diversification Opportunities for BLZ and GRS

0.35

Correlation Coefficient

BLZ  GRS

Weak diversification

The 3 months correlation between BLZ and GRS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and GRS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRS and BLZ 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 BLZ are associated (or correlated) with GRS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRS has no effect on the direction of BLZ i.e., BLZ and GRS go up and down completely randomly.

Pair Corralation between BLZ and GRS

Assuming the 90 days trading horizon BLZ is expected to generate 2.07 times less return on investment than GRS. In addition to that, BLZ is 1.18 times more volatile than GRS. It trades about 0.09 of its total potential returns per unit of risk. GRS is currently generating about 0.22 per unit of volatility. If you would invest  28.00  in GRS on September 1, 2024 and sell it today you would earn a total of  27.00  from holding GRS or generate 96.43% return on investment over 90 days.

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

BLZ  vs.  GRS

BLZ

Risk-Adjusted Performance

7 of 100

OK

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

GRS

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GRS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, GRS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BLZ and GRS

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

The idea behind BLZ and GRS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.