Correlation Between Blue Bird and Vicinity

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

Diversification Opportunities for Blue Bird and Vicinity

0.73

Correlation Coefficient

Blue Bird  Vicinity

Poor diversification

The 3 months correlation between Blue and Vicinity is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and Vicinity Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Motor Corp 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 Vicinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Motor Corp has no effect on the direction of Blue Bird i.e., Blue Bird and Vicinity go up and down completely randomly.

Pair Corralation between Blue Bird and Vicinity

Given the investment horizon of 90 days Blue Bird Corp is expected to generate 0.15 times more return on investment than Vicinity. However, Blue Bird Corp is 6.77 times less risky than Vicinity. It trades about -0.08 of its potential returns per unit of risk. Vicinity Motor Corp is currently generating about -0.18 per unit of risk. If you would invest  4,848  in Blue Bird Corp on August 31, 2024 and sell it today you would lose (783.00) from holding Blue Bird Corp or give up 16.15% of portfolio value over 90 days.

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

Blue Bird Corp  vs.  Vicinity Motor Corp

Blue Bird Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Bird Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Vicinity Motor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vicinity Motor Corp 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 Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Blue Bird and Vicinity

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

The idea behind Blue Bird Corp and Vicinity Motor 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.