Correlation Between Blue Label and Safari Investments

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

Diversification Opportunities for Blue Label and Safari Investments

-0.01

Correlation Coefficient

Blue Label  Safari Investments

Good diversification

The 3 months correlation between Blue and Safari is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Safari Investments RSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safari Investments RSA 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 Safari Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safari Investments RSA has no effect on the direction of Blue Label i.e., Blue Label and Safari Investments go up and down completely randomly.

Pair Corralation between Blue Label and Safari Investments

Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 0.58 times more return on investment than Safari Investments. However, Blue Label Telecoms is 1.71 times less risky than Safari Investments. It trades about 0.26 of its potential returns per unit of risk. Safari Investments RSA is currently generating about 0.0 per unit of risk. If you would invest  57,100  in Blue Label Telecoms on December 30, 2024 and sell it today you would earn a total of  20,400  from holding Blue Label Telecoms or generate 35.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Blue Label Telecoms  vs.  Safari Investments RSA

Blue Label Telecoms

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Label exhibited solid returns over the last few months and may actually be approaching a breakup point.

Safari Investments RSA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Safari Investments RSA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Safari Investments 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 Safari Investments

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

The idea behind Blue Label Telecoms and Safari Investments RSA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.