Correlation Between Bluzelle and MLN

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

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

Diversification Opportunities for Bluzelle and MLN

0.55

Correlation Coefficient

Bluzelle  MLN

Very weak diversification

The 3 months correlation between Bluzelle and MLN is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bluzelle and MLN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MLN and Bluzelle 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 Bluzelle are associated (or correlated) with MLN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MLN has no effect on the direction of Bluzelle i.e., Bluzelle and MLN go up and down completely randomly.

Pair Corralation between Bluzelle and MLN

Assuming the 90 days trading horizon Bluzelle is expected to generate 1.15 times less return on investment than MLN. But when comparing it to its historical volatility, Bluzelle is 1.13 times less risky than MLN. It trades about 0.08 of its potential returns per unit of risk. MLN is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,755  in MLN on February 7, 2024 and sell it today you would earn a total of  467.00  from holding MLN or generate 26.61% return on investment over 90 days.

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

Bluzelle  vs.  MLN

Bluzelle

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bluzelle are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bluzelle exhibited solid returns over the last few months and may actually be approaching a breakup point.

MLN

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MLN are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MLN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bluzelle and MLN

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

The idea behind Bluzelle and MLN 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 Global Correlations module to find global opportunities by holding instruments from different markets.