Correlation Between Blue Label and Hulamin

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

Diversification Opportunities for Blue Label and Hulamin

-0.23

Correlation Coefficient

Blue Label  Hulamin

Very good diversification

The 3 months correlation between Blue and Hulamin is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Hulamin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hulamin 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 Hulamin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hulamin has no effect on the direction of Blue Label i.e., Blue Label and Hulamin go up and down completely randomly.

Pair Corralation between Blue Label and Hulamin

Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 1.05 times more return on investment than Hulamin. However, Blue Label is 1.05 times more volatile than Hulamin. It trades about -0.25 of its potential returns per unit of risk. Hulamin is currently generating about -0.4 per unit of risk. If you would invest  58,600  in Blue Label Telecoms on October 12, 2024 and sell it today you would lose (3,600) from holding Blue Label Telecoms or give up 6.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Blue Label Telecoms  vs.  Hulamin

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.

Hulamin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hulamin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Blue Label and Hulamin

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

The idea behind Blue Label Telecoms and Hulamin 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.