Correlation Between Phoenix and Blue Bird

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

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

Diversification Opportunities for Phoenix and Blue Bird

0.07

Correlation Coefficient

Phoenix  Blue Bird

Significant diversification

The 3 months correlation between Phoenix and Blue is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix Motor Common and Blue Bird Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Bird Corp and Phoenix 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 Phoenix Motor Common are associated (or correlated) with Blue Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Bird Corp has no effect on the direction of Phoenix i.e., Phoenix and Blue Bird go up and down completely randomly.

Pair Corralation between Phoenix and Blue Bird

Considering the 90-day investment horizon Phoenix Motor Common is expected to generate 10.0 times more return on investment than Blue Bird. However, Phoenix is 10.0 times more volatile than Blue Bird Corp. It trades about 0.05 of its potential returns per unit of risk. Blue Bird Corp is currently generating about -0.11 per unit of risk. If you would invest  42.00  in Phoenix Motor Common on September 12, 2024 and sell it today you would lose (10.00) from holding Phoenix Motor Common or give up 23.81% of portfolio value over 90 days.

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

Phoenix Motor Common  vs.  Blue Bird Corp

Phoenix Motor Common

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix Motor Common are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Phoenix showed solid returns over the last few months and may actually be approaching a breakup point.

Blue Bird Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Bird Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Phoenix and Blue Bird

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

The idea behind Phoenix Motor Common and Blue Bird 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.