Correlation Between Blue Label and Absa
Can any of the company-specific risk be diversified away by investing in both Blue Label and Absa 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 Label and Absa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Label Telecoms and Absa Group, you can compare the effects of market volatilities on Blue Label and Absa 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 Label with a short position of Absa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and Absa.
Diversification Opportunities for Blue Label and Absa
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Blue and Absa is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Absa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group and Blue Label 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 Label Telecoms are associated (or correlated) with Absa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Group has no effect on the direction of Blue Label i.e., Blue Label and Absa go up and down completely randomly.
Pair Corralation between Blue Label and Absa
Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 1.25 times more return on investment than Absa. However, Blue Label is 1.25 times more volatile than Absa Group. It trades about 0.08 of its potential returns per unit of risk. Absa Group is currently generating about 0.05 per unit of risk. If you would invest 38,200 in Blue Label Telecoms on September 4, 2024 and sell it today you would earn a total of 16,300 from holding Blue Label Telecoms or generate 42.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Label Telecoms vs. Absa Group
Performance |
| Timeline |
| Blue Label Telecoms |
| Absa Group |
Blue Label and Absa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Label and Absa
The main advantage of trading using opposite Blue Label and Absa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label position performs unexpectedly, Absa 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 Absa will offset losses from the drop in Absa's long position.| Blue Label vs. MTN Group | Blue Label vs. Vodacom Group | Blue Label vs. Telkom | Blue Label vs. Telemasters Holdings |
| Absa vs. Blue Label Telecoms | Absa vs. Kumba Iron Ore | Absa vs. Standard Bank Group | Absa vs. Frontier Transport Holdings |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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