Correlation Between BLZ and XWC
Can any of the company-specific risk be diversified away by investing in both BLZ and XWC 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 BLZ and XWC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BLZ and XWC, you can compare the effects of market volatilities on BLZ and XWC 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 BLZ with a short position of XWC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLZ and XWC.
Diversification Opportunities for BLZ and XWC
Significant diversification
The 3 months correlation between BLZ and XWC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and XWC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWC and BLZ 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 BLZ are associated (or correlated) with XWC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWC has no effect on the direction of BLZ i.e., BLZ and XWC go up and down completely randomly.
Pair Corralation between BLZ and XWC
Assuming the 90 days trading horizon BLZ is expected to generate 1.31 times less return on investment than XWC. In addition to that, BLZ is 2.4 times more volatile than XWC. It trades about 0.07 of its total potential returns per unit of risk. XWC is currently generating about 0.21 per unit of volatility. If you would invest 3.27 in XWC on April 21, 2025 and sell it today you would earn a total of 0.86 from holding XWC or generate 26.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
BLZ vs. XWC
Performance |
Timeline |
BLZ |
XWC |
BLZ and XWC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BLZ and XWC
The main advantage of trading using opposite BLZ and XWC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLZ position performs unexpectedly, XWC 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 XWC will offset losses from the drop in XWC's long position.The idea behind BLZ and XWC 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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