Correlation Between Blue Bird and NWTN

Can any of the company-specific risk be diversified away by investing in both Blue Bird and NWTN 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 NWTN 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 NWTN Class B, you can compare the effects of market volatilities on Blue Bird and NWTN 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 NWTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Bird and NWTN.

Diversification Opportunities for Blue Bird and NWTN

0.24

Correlation Coefficient

Blue Bird  NWTN

Modest diversification

The 3 months correlation between Blue and NWTN is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and NWTN Class B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NWTN Class B 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 NWTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NWTN Class B has no effect on the direction of Blue Bird i.e., Blue Bird and NWTN go up and down completely randomly.

Pair Corralation between Blue Bird and NWTN

Given the investment horizon of 90 days Blue Bird Corp is expected to generate 0.76 times more return on investment than NWTN. However, Blue Bird Corp is 1.32 times less risky than NWTN. It trades about -0.03 of its potential returns per unit of risk. NWTN Class B is currently generating about -0.2 per unit of risk. If you would invest  3,641  in Blue Bird Corp on February 4, 2024 and sell it today you would lose (101.00) from holding Blue Bird Corp or give up 2.77% 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.  NWTN Class B

Blue Bird Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Bird Corp are ranked lower than 6 (%) 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.

NWTN Class B

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NWTN Class B are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, NWTN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Bird and NWTN

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

The idea behind Blue Bird Corp and NWTN Class B 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.