Correlation Between Blue Lagoon and Mentor Capital

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

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

Diversification Opportunities for Blue Lagoon and Mentor Capital

-0.62

Correlation Coefficient

Blue Lagoon  Mentor Capital

Excellent diversification

The 3 months correlation between Blue and Mentor is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Blue Lagoon Resources and Mentor Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentor Capital and Blue Lagoon 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 Lagoon Resources are associated (or correlated) with Mentor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentor Capital has no effect on the direction of Blue Lagoon i.e., Blue Lagoon and Mentor Capital go up and down completely randomly.

Pair Corralation between Blue Lagoon and Mentor Capital

Assuming the 90 days horizon Blue Lagoon Resources is expected to generate 0.61 times more return on investment than Mentor Capital. However, Blue Lagoon Resources is 1.63 times less risky than Mentor Capital. It trades about 0.2 of its potential returns per unit of risk. Mentor Capital is currently generating about 0.04 per unit of risk. If you would invest  11.00  in Blue Lagoon Resources on February 3, 2025 and sell it today you would earn a total of  20.00  from holding Blue Lagoon Resources or generate 181.82% return on investment over 90 days.

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

Blue Lagoon Resources  vs.  Mentor Capital

Blue Lagoon Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Lagoon Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Blue Lagoon reported solid returns over the last few months and may actually be approaching a breakup point.

Mentor Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mentor Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Mentor Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Lagoon and Mentor Capital

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

The idea behind Blue Lagoon Resources and Mentor Capital 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.