Correlation Between New Generation and Blueriver Acquisition

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

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

Diversification Opportunities for New Generation and Blueriver Acquisition

0.62

Correlation Coefficient

New Generation  Blueriver Acquisition

Poor diversification

The 3 months correlation between New and Blueriver is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding New Generation Consumer and Blueriver Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blueriver Acquisition and New Generation 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 New Generation Consumer are associated (or correlated) with Blueriver Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blueriver Acquisition has no effect on the direction of New Generation i.e., New Generation and Blueriver Acquisition go up and down completely randomly.

Pair Corralation between New Generation and Blueriver Acquisition

Given the investment horizon of 90 days New Generation Consumer is expected to generate 67.01 times more return on investment than Blueriver Acquisition. However, New Generation is 67.01 times more volatile than Blueriver Acquisition Corp. It trades about 0.06 of its potential returns per unit of risk. Blueriver Acquisition Corp is currently generating about -0.41 per unit of risk. If you would invest  0.07  in New Generation Consumer on September 18, 2024 and sell it today you would lose (0.01) from holding New Generation Consumer or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	9.52%
Values	Daily Returns

New Generation Consumer  vs.  Blueriver Acquisition Corp

New Generation Consumer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Generation Consumer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, New Generation reported solid returns over the last few months and may actually be approaching a breakup point.

Blueriver Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blueriver Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Blueriver Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with New Generation and Blueriver Acquisition

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

The idea behind New Generation Consumer and Blueriver Acquisition Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.