Correlation Between Blue Bird and Kyndryl Holdings

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

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

Diversification Opportunities for Blue Bird and Kyndryl Holdings

0.2

Correlation Coefficient

Blue Bird  Kyndryl Holdings

Modest diversification

The 3 months correlation between Blue and Kyndryl is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and Kyndryl Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyndryl Holdings and Blue Bird 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 Bird Corp are associated (or correlated) with Kyndryl Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyndryl Holdings has no effect on the direction of Blue Bird i.e., Blue Bird and Kyndryl Holdings go up and down completely randomly.

Pair Corralation between Blue Bird and Kyndryl Holdings

Given the investment horizon of 90 days Blue Bird Corp is expected to generate 1.56 times more return on investment than Kyndryl Holdings. However, Blue Bird is 1.56 times more volatile than Kyndryl Holdings. It trades about -0.04 of its potential returns per unit of risk. Kyndryl Holdings is currently generating about -0.17 per unit of risk. If you would invest  3,603  in Blue Bird Corp on January 25, 2024 and sell it today you would lose (104.00) from holding Blue Bird Corp or give up 2.89% of portfolio value over 90 days.

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

Blue Bird Corp  vs.  Kyndryl Holdings

Blue Bird Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Bird Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental drivers, Blue Bird exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kyndryl Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyndryl Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Kyndryl Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Blue Bird and Kyndryl Holdings

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

The idea behind Blue Bird Corp and Kyndryl Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.