Correlation Between Blue Label and Pan African
Can any of the company-specific risk be diversified away by investing in both Blue Label and Pan African 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 Pan African 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 Pan African Resources, you can compare the effects of market volatilities on Blue Label and Pan African 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 Pan African. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and Pan African.
Diversification Opportunities for Blue Label and Pan African
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blue and Pan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Pan African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan African Resources 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 Pan African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan African Resources has no effect on the direction of Blue Label i.e., Blue Label and Pan African go up and down completely randomly.
Pair Corralation between Blue Label and Pan African
Assuming the 90 days trading horizon Blue Label is expected to generate 3.0 times less return on investment than Pan African. But when comparing it to its historical volatility, Blue Label Telecoms is 1.14 times less risky than Pan African. It trades about 0.03 of its potential returns per unit of risk. Pan African Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 34,900 in Pan African Resources on September 12, 2024 and sell it today you would earn a total of 52,600 from holding Pan African Resources or generate 150.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Label Telecoms vs. Pan African Resources
Performance |
| Timeline |
| Blue Label Telecoms |
| Pan African Resources |
Blue Label and Pan African Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Label and Pan African
The main advantage of trading using opposite Blue Label and Pan African positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label position performs unexpectedly, Pan African 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 Pan African will offset losses from the drop in Pan African's long position.| Blue Label vs. Safari Investments RSA | Blue Label vs. Capitec Bank Holdings | Blue Label vs. Copper 360 | Blue Label vs. City Lodge Hotels |
| Pan African vs. CA Sales Holdings | Pan African vs. Blue Label Telecoms | Pan African vs. AfroCentric Investment Corp | Pan African vs. Zeder Investments |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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