Correlation Between Repco Home and Blue Coast

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

By analyzing existing cross correlation between Repco Home Finance and Blue Coast Hotels, you can compare the effects of market volatilities on Repco Home and Blue Coast 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 Repco Home with a short position of Blue Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repco Home and Blue Coast.

Diversification Opportunities for Repco Home and Blue Coast

-0.22

Correlation Coefficient

Repco Home  Blue Coast

Very good diversification

The 3 months correlation between Repco and Blue is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance and Blue Coast Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Coast Hotels and Repco Home 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 Repco Home Finance are associated (or correlated) with Blue Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Coast Hotels has no effect on the direction of Repco Home i.e., Repco Home and Blue Coast go up and down completely randomly.

Pair Corralation between Repco Home and Blue Coast

Assuming the 90 days trading horizon Repco Home Finance is expected to under-perform the Blue Coast. In addition to that, Repco Home is 1.4 times more volatile than Blue Coast Hotels. It trades about -0.05 of its total potential returns per unit of risk. Blue Coast Hotels is currently generating about 0.12 per unit of volatility. If you would invest  871.00  in Blue Coast Hotels on September 4, 2024 and sell it today you would earn a total of  97.00  from holding Blue Coast Hotels or generate 11.14% return on investment over 90 days.

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

Repco Home Finance  vs.  Blue Coast Hotels

Repco Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repco Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Blue Coast Hotels

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Coast Hotels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Blue Coast may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Repco Home and Blue Coast

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

The idea behind Repco Home Finance and Blue Coast Hotels 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.