Correlation Between Bluerock Homes and SEP Acquisition

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

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

Diversification Opportunities for Bluerock Homes and SEP Acquisition

0.57

Correlation Coefficient

Bluerock Homes  SEP Acquisition

Very weak diversification

The 3 months correlation between Bluerock and SEP is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bluerock Homes Trust and SEP Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEP Acquisition Corp and Bluerock Homes 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 Bluerock Homes Trust are associated (or correlated) with SEP Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEP Acquisition Corp has no effect on the direction of Bluerock Homes i.e., Bluerock Homes and SEP Acquisition go up and down completely randomly.

Pair Corralation between Bluerock Homes and SEP Acquisition

Considering the 90-day investment horizon Bluerock Homes is expected to generate 26.43 times less return on investment than SEP Acquisition. But when comparing it to its historical volatility, Bluerock Homes Trust is 5.69 times less risky than SEP Acquisition. It trades about 0.05 of its potential returns per unit of risk. SEP Acquisition Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  963.00  in SEP Acquisition Corp on January 28, 2024 and sell it today you would earn a total of  388.00  from holding SEP Acquisition Corp or generate 40.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Bluerock Homes Trust  vs.  SEP Acquisition Corp

Bluerock Homes Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bluerock Homes Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical indicators, Bluerock Homes displayed solid returns over the last few months and may actually be approaching a breakup point.

SEP Acquisition Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEP Acquisition Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SEP Acquisition unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bluerock Homes and SEP Acquisition

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

The idea behind Bluerock Homes Trust and SEP Acquisition Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.