Correlation Between Blue Label and Bid

Can any of the company-specific risk be diversified away by investing in both Blue Label and Bid 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 Bid 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 Bid Corporation, you can compare the effects of market volatilities on Blue Label and Bid 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 Bid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and Bid.

Diversification Opportunities for Blue Label and Bid

-0.37

Correlation Coefficient

Blue Label  Bid

Very good diversification

The 3 months correlation between Blue and Bid is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Bid Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bid Corporation 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 Bid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bid Corporation has no effect on the direction of Blue Label i.e., Blue Label and Bid go up and down completely randomly.

Pair Corralation between Blue Label and Bid

Assuming the 90 days trading horizon Blue Label Telecoms is expected to under-perform the Bid. In addition to that, Blue Label is 1.58 times more volatile than Bid Corporation. It trades about -0.25 of its total potential returns per unit of risk. Bid Corporation is currently generating about -0.08 per unit of volatility. If you would invest  4,480,200  in Bid Corporation on October 12, 2024 and sell it today you would lose (62,300) from holding Bid Corporation or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Blue Label Telecoms  vs.  Bid Corp.

Blue Label Telecoms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Label Telecoms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Blue Label is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bid Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bid Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bid is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Blue Label and Bid

The main advantage of trading using opposite Blue Label and Bid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label position performs unexpectedly, Bid 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 Bid will offset losses from the drop in Bid's long position.

The idea behind Blue Label Telecoms and Bid Corporation 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.

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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.