Correlation Between Blue Label and Transpaco

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

Diversification Opportunities for Blue Label and Transpaco

0.14

Correlation Coefficient

Blue Label  Transpaco

Average diversification

The 3 months correlation between Blue and Transpaco is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Transpaco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transpaco 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 Transpaco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transpaco has no effect on the direction of Blue Label i.e., Blue Label and Transpaco go up and down completely randomly.

Pair Corralation between Blue Label and Transpaco

Assuming the 90 days trading horizon Blue Label Telecoms is expected to under-perform the Transpaco. But the stock apears to be less risky and, when comparing its historical volatility, Blue Label Telecoms is 3.62 times less risky than Transpaco. The stock trades about -0.18 of its potential returns per unit of risk. The Transpaco is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  370,000  in Transpaco on October 14, 2024 and sell it today you would earn a total of  5,000  from holding Transpaco or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Blue Label Telecoms  vs.  Transpaco

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Transpaco

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Blue Label Telecoms and Transpaco 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.