Correlation Between Blue Label and Gold Fields
Can any of the company-specific risk be diversified away by investing in both Blue Label and Gold Fields 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 Gold Fields 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 Gold Fields, you can compare the effects of market volatilities on Blue Label and Gold Fields 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 Gold Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and Gold Fields.
Diversification Opportunities for Blue Label and Gold Fields
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blue and Gold is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Gold Fields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Blue Label i.e., Blue Label and Gold Fields go up and down completely randomly.
Pair Corralation between Blue Label and Gold Fields
Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 0.3 times more return on investment than Gold Fields. However, Blue Label Telecoms is 3.29 times less risky than Gold Fields. It trades about -0.37 of its potential returns per unit of risk. Gold Fields is currently generating about -0.19 per unit of risk. If you would invest 55,800 in Blue Label Telecoms on August 28, 2024 and sell it today you would lose (4,000) from holding Blue Label Telecoms or give up 7.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Label Telecoms vs. Gold Fields
Performance |
| Timeline |
| Blue Label Telecoms |
| Gold Fields |
Blue Label and Gold Fields Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Label and Gold Fields
The main advantage of trading using opposite Blue Label and Gold Fields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label position performs unexpectedly, Gold Fields 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 Gold Fields will offset losses from the drop in Gold Fields' long position.| Blue Label vs. Harmony Gold Mining | Blue Label vs. Capitec Bank Holdings | Blue Label vs. Safari Investments RSA | Blue Label vs. Reinet Investments SCA |
| Gold Fields vs. HomeChoice Investments | Gold Fields vs. Copper 360 | Gold Fields vs. Blue Label Telecoms | Gold Fields vs. E Media 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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