Correlation Between Regional Management and Trailblazer Merger

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

By analyzing existing cross correlation between Regional Management Corp and Trailblazer Merger, you can compare the effects of market volatilities on Regional Management and Trailblazer Merger 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 Regional Management with a short position of Trailblazer Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Management and Trailblazer Merger.

Diversification Opportunities for Regional Management and Trailblazer Merger

-0.39

Correlation Coefficient

Regional Management  Trailblazer Merger

Very good diversification

The 3 months correlation between Regional and Trailblazer is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Regional Management Corp and Trailblazer Merger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trailblazer Merger and Regional Management 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 Regional Management Corp are associated (or correlated) with Trailblazer Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trailblazer Merger has no effect on the direction of Regional Management i.e., Regional Management and Trailblazer Merger go up and down completely randomly.

Pair Corralation between Regional Management and Trailblazer Merger

Allowing for the 90-day total investment horizon Regional Management Corp is expected to under-perform the Trailblazer Merger. But the stock apears to be less risky and, when comparing its historical volatility, Regional Management Corp is 5.92 times less risky than Trailblazer Merger. The stock trades about -0.03 of its potential returns per unit of risk. The Trailblazer Merger is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Trailblazer Merger on August 30, 2024 and sell it today you would earn a total of  6.00  from holding Trailblazer Merger or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Regional Management Corp  vs.  Trailblazer Merger

Regional Management Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Trailblazer Merger

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trailblazer Merger are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Trailblazer Merger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regional Management and Trailblazer Merger

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

The idea behind Regional Management Corp and Trailblazer Merger 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.