Correlation Between BZAM and Stem Holdings

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

By analyzing existing cross correlation between BZAM and Stem Holdings, you can compare the effects of market volatilities on BZAM and Stem Holdings 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 Stem Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BZAM and Stem Holdings.

Diversification Opportunities for BZAM and Stem Holdings

0.0

Correlation Coefficient

BZAM  Stem Holdings

Pay attention - limited upside

The 3 months correlation between BZAM and Stem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BZAM and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings 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 Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of BZAM i.e., BZAM and Stem Holdings go up and down completely randomly.

Pair Corralation between BZAM and Stem Holdings

If you would invest  1.90  in BZAM on September 19, 2024 and sell it today you would lose (1.90) from holding BZAM or give up 100.0% of portfolio value over 90 days.

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

BZAM  vs.  Stem Holdings

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.

Stem Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stem Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Stem Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BZAM and Stem Holdings

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

The idea behind BZAM and Stem Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.