Correlation Between SGS SA and Bluerock Homes

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

By analyzing existing cross correlation between SGS SA and Bluerock Homes Trust, you can compare the effects of market volatilities on SGS SA and Bluerock Homes 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 SGS SA with a short position of Bluerock Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and Bluerock Homes.

Diversification Opportunities for SGS SA and Bluerock Homes

0.57

Correlation Coefficient

SGS SA  Bluerock Homes

Very weak diversification

The 3 months correlation between SGS and Bluerock is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Bluerock Homes Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluerock Homes Trust and SGS SA 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 SGS SA are associated (or correlated) with Bluerock Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluerock Homes Trust has no effect on the direction of SGS SA i.e., SGS SA and Bluerock Homes go up and down completely randomly.

Pair Corralation between SGS SA and Bluerock Homes

Assuming the 90 days horizon SGS SA is expected to under-perform the Bluerock Homes. But the pink sheet apears to be less risky and, when comparing its historical volatility, SGS SA is 1.55 times less risky than Bluerock Homes. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Bluerock Homes Trust is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,481  in Bluerock Homes Trust on September 20, 2024 and sell it today you would lose (126.00) from holding Bluerock Homes Trust or give up 8.51% of portfolio value over 90 days.

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

SGS SA  vs.  Bluerock Homes Trust

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bluerock Homes Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SGS SA and Bluerock Homes

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

The idea behind SGS SA and Bluerock Homes Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.