Correlation Between Premium Income and Clear Blue

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

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

Diversification Opportunities for Premium Income and Clear Blue

0.63

Correlation Coefficient

Premium Income  Clear Blue

Poor diversification

The 3 months correlation between Premium and Clear is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Premium Income and Clear Blue Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clear Blue Technologies and Premium Income 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 Premium Income are associated (or correlated) with Clear Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clear Blue Technologies has no effect on the direction of Premium Income i.e., Premium Income and Clear Blue go up and down completely randomly.

Pair Corralation between Premium Income and Clear Blue

Assuming the 90 days trading horizon Premium Income is expected to generate 0.09 times more return on investment than Clear Blue. However, Premium Income is 10.79 times less risky than Clear Blue. It trades about -0.02 of its potential returns per unit of risk. Clear Blue Technologies is currently generating about -0.02 per unit of risk. If you would invest  620.00  in Premium Income on September 25, 2024 and sell it today you would lose (13.00) from holding Premium Income or give up 2.1% of portfolio value over 90 days.

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

Premium Income  vs.  Clear Blue Technologies

Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Premium Income is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Clear Blue Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clear Blue Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Premium Income and Clear Blue

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

The idea behind Premium Income and Clear Blue Technologies 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.