Correlation Between Blue Square and Melisron
Can any of the company-specific risk be diversified away by investing in both Blue Square and Melisron 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 Blue Square and Melisron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Square Real and Melisron, you can compare the effects of market volatilities on Blue Square and Melisron 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 Blue Square with a short position of Melisron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Square and Melisron.
Diversification Opportunities for Blue Square and Melisron
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Blue and Melisron is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Blue Square Real and Melisron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melisron and Blue Square 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 Blue Square Real are associated (or correlated) with Melisron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melisron has no effect on the direction of Blue Square i.e., Blue Square and Melisron go up and down completely randomly.
Pair Corralation between Blue Square and Melisron
Assuming the 90 days trading horizon Blue Square Real is expected to generate 1.69 times more return on investment than Melisron. However, Blue Square is 1.69 times more volatile than Melisron. It trades about 0.27 of its potential returns per unit of risk. Melisron is currently generating about -0.18 per unit of risk. If you would invest 2,421,484 in Blue Square Real on January 26, 2024 and sell it today you would earn a total of 358,516 from holding Blue Square Real or generate 14.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Square Real vs. Melisron
Performance |
| Timeline |
| Blue Square Real |
| Melisron |
Blue Square and Melisron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Square and Melisron
The main advantage of trading using opposite Blue Square and Melisron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Square position performs unexpectedly, Melisron 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 Melisron will offset losses from the drop in Melisron's long position.The idea behind Blue Square Real and Melisron 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.Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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