Correlation Between MTN and Blue Label
Can any of the company-specific risk be diversified away by investing in both MTN and Blue Label 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 MTN and Blue Label into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTN Group and Blue Label Telecoms, you can compare the effects of market volatilities on MTN and Blue Label 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 MTN with a short position of Blue Label. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN and Blue Label.
Diversification Opportunities for MTN and Blue Label
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MTN and Blue is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group and Blue Label Telecoms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Label Telecoms and MTN 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 MTN Group are associated (or correlated) with Blue Label. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Label Telecoms has no effect on the direction of MTN i.e., MTN and Blue Label go up and down completely randomly.
Pair Corralation between MTN and Blue Label
Assuming the 90 days trading horizon MTN Group is expected to under-perform the Blue Label. But the stock apears to be less risky and, when comparing its historical volatility, MTN Group is 1.11 times less risky than Blue Label. The stock trades about 0.0 of its potential returns per unit of risk. The Blue Label Telecoms is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 53,800 in Blue Label Telecoms on November 2, 2024 and sell it today you would earn a total of 10,000 from holding Blue Label Telecoms or generate 18.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTN Group vs. Blue Label Telecoms
Performance |
| Timeline |
| MTN Group |
| Blue Label Telecoms |
MTN and Blue Label Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTN and Blue Label
The main advantage of trading using opposite MTN and Blue Label positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTN position performs unexpectedly, Blue Label 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 Blue Label will offset losses from the drop in Blue Label's long position.The idea behind MTN Group and Blue Label Telecoms pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Blue Label vs. MC Mining | Blue Label vs. Bytes Technology | Blue Label vs. Astral Foods | Blue Label vs. Mantengu Mining |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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