Correlation Between Activision Blizzard and Bluebird Bio

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Can any of the company-specific risk be diversified away by investing in both Activision Blizzard and Bluebird Bio 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 Activision Blizzard and Bluebird Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Activision Blizzard and Bluebird Bio, you can compare the effects of market volatilities on Activision Blizzard and Bluebird Bio 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 Activision Blizzard with a short position of Bluebird Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Activision Blizzard and Bluebird Bio.

Diversification Opportunities for Activision Blizzard and Bluebird Bio

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Activision and Bluebird is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Activision Blizzard and Bluebird Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluebird Bio and Activision Blizzard 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 Activision Blizzard are associated (or correlated) with Bluebird Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluebird Bio has no effect on the direction of Activision Blizzard i.e., Activision Blizzard and Bluebird Bio go up and down completely randomly.

Pair Corralation between Activision Blizzard and Bluebird Bio

Given the investment horizon of 90 days Activision Blizzard is expected to generate 7.9 times less return on investment than Bluebird Bio. But when comparing it to its historical volatility, Activision Blizzard is 4.87 times less risky than Bluebird Bio. It trades about 0.14 of its potential returns per unit of risk. Bluebird Bio is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  631.00  in Bluebird Bio on September 3, 2022 and sell it today you would earn a total of  218.00  from holding Bluebird Bio or generate 34.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Activision Blizzard  vs.  Bluebird Bio

 Performance (%) 
       Timeline  
Activision Blizzard 
Activision Performance
0 of 100
Over the last 90 days Activision Blizzard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Activision Blizzard is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Activision Price Channel

Bluebird Bio 
Bluebird Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bluebird Bio are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bluebird Bio exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bluebird Price Channel

Activision Blizzard and Bluebird Bio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Activision Blizzard and Bluebird Bio

The main advantage of trading using opposite Activision Blizzard and Bluebird Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Activision Blizzard position performs unexpectedly, Bluebird Bio 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 Bluebird Bio will offset losses from the drop in Bluebird Bio's long position.
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The idea behind Activision Blizzard and Bluebird Bio 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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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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