Correlation Between Blue Label and SLM Corp
Can any of the company-specific risk be diversified away by investing in both Blue Label and SLM Corp 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 SLM Corp 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 Sanlam, you can compare the effects of market volatilities on Blue Label and SLM Corp 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 SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and SLM Corp.
Diversification Opportunities for Blue Label and SLM Corp
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blue and SLM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Sanlam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Blue Label i.e., Blue Label and SLM Corp go up and down completely randomly.
Pair Corralation between Blue Label and SLM Corp
Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 1.3 times more return on investment than SLM Corp. However, Blue Label is 1.3 times more volatile than Sanlam. It trades about 0.08 of its potential returns per unit of risk. Sanlam is currently generating about 0.1 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Label Telecoms vs. Sanlam
Performance |
| Timeline |
| Blue Label Telecoms |
| SLM Corp |
Blue Label and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Label and SLM Corp
The main advantage of trading using opposite Blue Label and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label position performs unexpectedly, SLM Corp 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 SLM Corp will offset losses from the drop in SLM Corp's long position.| Blue Label vs. MTN Group | Blue Label vs. Vodacom Group | Blue Label vs. Telkom | Blue Label vs. Telemasters Holdings |
| SLM Corp vs. Harmony Gold Mining | SLM Corp vs. Kumba Iron Ore | SLM Corp vs. Frontier Transport Holdings | SLM Corp vs. Datatec |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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