Correlation Between Blue Label and HomeChoice Investments
Can any of the company-specific risk be diversified away by investing in both Blue Label and HomeChoice Investments 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 HomeChoice Investments 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 HomeChoice Investments, you can compare the effects of market volatilities on Blue Label and HomeChoice Investments 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 HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and HomeChoice Investments.
Diversification Opportunities for Blue Label and HomeChoice Investments
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Blue and HomeChoice is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments 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 HomeChoice Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeChoice Investments has no effect on the direction of Blue Label i.e., Blue Label and HomeChoice Investments go up and down completely randomly.
Pair Corralation between Blue Label and HomeChoice Investments
Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 0.21 times more return on investment than HomeChoice Investments. However, Blue Label Telecoms is 4.76 times less risky than HomeChoice Investments. It trades about -0.37 of its potential returns per unit of risk. HomeChoice Investments is currently generating about -0.22 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Label Telecoms vs. HomeChoice Investments
Performance |
| Timeline |
| Blue Label Telecoms |
| HomeChoice Investments |
Blue Label and HomeChoice Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Label and HomeChoice Investments
The main advantage of trading using opposite Blue Label and HomeChoice Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label position performs unexpectedly, HomeChoice Investments 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 HomeChoice Investments will offset losses from the drop in HomeChoice Investments' 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 |
| HomeChoice Investments vs. Sasol Ltd Bee | HomeChoice Investments vs. Centaur Bci Balanced | HomeChoice Investments vs. Sabvest Capital | HomeChoice Investments vs. Growthpoint Properties |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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