Correlation Between EGold and Bluzelle

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

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

Diversification Opportunities for EGold and Bluzelle

-0.11

Correlation Coefficient

EGold  Bluzelle

Good diversification

The 3 months correlation between EGold and Bluzelle is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding eGold and Bluzelle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluzelle and EGold 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 eGold are associated (or correlated) with Bluzelle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluzelle has no effect on the direction of EGold i.e., EGold and Bluzelle go up and down completely randomly.

Pair Corralation between EGold and Bluzelle

Assuming the 90 days trading horizon eGold is expected to under-perform the Bluzelle. But the crypto coin apears to be less risky and, when comparing its historical volatility, eGold is 1.17 times less risky than Bluzelle. The crypto coin trades about -0.24 of its potential returns per unit of risk. The Bluzelle is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Bluzelle on January 29, 2024 and sell it today you would lose (5.00) from holding Bluzelle or give up 12.5% of portfolio value over 90 days.

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

eGold  vs.  Bluzelle

eGold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eGold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for eGold shareholders.

Bluzelle

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bluzelle are ranked lower than 5 (%) 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.

Pair Trading with EGold and Bluzelle

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

The idea behind eGold and Bluzelle 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.