Correlation Between We Buy and Blue Label
Can any of the company-specific risk be diversified away by investing in both We Buy 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 We Buy and Blue Label into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between We Buy Cars and Blue Label Telecoms, you can compare the effects of market volatilities on We Buy 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 We Buy with a short position of Blue Label. Check out your portfolio center. Please also check ongoing floating volatility patterns of We Buy and Blue Label.
Diversification Opportunities for We Buy and Blue Label
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WBC and Blue is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding We Buy Cars 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 We Buy 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 We Buy Cars 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 We Buy i.e., We Buy and Blue Label go up and down completely randomly.
Pair Corralation between We Buy and Blue Label
Assuming the 90 days trading horizon We Buy Cars is expected to generate 0.86 times more return on investment than Blue Label. However, We Buy Cars is 1.17 times less risky than Blue Label. It trades about 0.24 of its potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.05 per unit of risk. If you would invest 204,000 in We Buy Cars on August 27, 2024 and sell it today you would earn a total of 215,600 from holding We Buy Cars or generate 105.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 42.59% |
| Values | Daily Returns |
We Buy Cars vs. Blue Label Telecoms
Performance |
| Timeline |
| We Buy Cars |
| Blue Label Telecoms |
We Buy and Blue Label Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with We Buy and Blue Label
The main advantage of trading using opposite We Buy and Blue Label positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if We Buy 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.| We Buy vs. eMedia Holdings Limited | We Buy vs. Deneb Investments | We Buy vs. Hosken Consolidated Investments | We Buy vs. Astoria 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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