Correlation Between BZAM and RIV Capital

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

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

Diversification Opportunities for BZAM and RIV Capital

0.58

Correlation Coefficient

BZAM  RIV Capital

Very weak diversification

The 3 months correlation between BZAM and RIV is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BZAM and RIV Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIV Capital and BZAM 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 BZAM are associated (or correlated) with RIV Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIV Capital has no effect on the direction of BZAM i.e., BZAM and RIV Capital go up and down completely randomly.

Pair Corralation between BZAM and RIV Capital

Assuming the 90 days horizon BZAM is expected to generate 14.04 times more return on investment than RIV Capital. However, BZAM is 14.04 times more volatile than RIV Capital. It trades about 0.1 of its potential returns per unit of risk. RIV Capital is currently generating about 0.01 per unit of risk. If you would invest  1.80  in BZAM on September 19, 2024 and sell it today you would lose (1.80) from holding BZAM or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

BZAM  vs.  RIV Capital

BZAM

Risk-Adjusted Performance

9 of 100

OK

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

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital 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 basic 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.

Pair Trading with BZAM and RIV Capital

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

The idea behind BZAM and RIV Capital 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.