Correlation Between BLZ and Layer3

Can any of the company-specific risk be diversified away by investing in both BLZ and Layer3 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 Layer3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BLZ and Layer3, you can compare the effects of market volatilities on BLZ and Layer3 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 Layer3. Check out your portfolio center. Please also check ongoing floating volatility patterns of BLZ and Layer3.

Diversification Opportunities for BLZ and Layer3

0.48

Correlation Coefficient

BLZ  Layer3

Very weak diversification

The 3 months correlation between BLZ and Layer3 is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and Layer3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Layer3 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 Layer3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Layer3 has no effect on the direction of BLZ i.e., BLZ and Layer3 go up and down completely randomly.

Pair Corralation between BLZ and Layer3

Assuming the 90 days trading horizon BLZ is expected to generate 0.4 times more return on investment than Layer3. However, BLZ is 2.53 times less risky than Layer3. It trades about 0.01 of its potential returns per unit of risk. Layer3 is currently generating about -0.01 per unit of risk. If you would invest  3.89  in BLZ on May 14, 2025 and sell it today you would lose (0.06) from holding BLZ or give up 1.54% of portfolio value over 90 days.

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

BLZ  vs.  Layer3

BLZ

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BLZ are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BLZ is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Layer3

Risk-Adjusted Performance

Weakest

Over the last 90 days Layer3 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Layer3 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BLZ and Layer3

The main advantage of trading using opposite BLZ and Layer3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLZ position performs unexpectedly, Layer3 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 Layer3 will offset losses from the drop in Layer3's long position.

The idea behind BLZ and Layer3 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.