Correlation Between Blue Label and Trencor

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

Diversification Opportunities for Blue Label and Trencor

0.0

Correlation Coefficient

Blue Label  Trencor

Pay attention - limited upside

The 3 months correlation between Blue and Trencor is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Trencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trencor 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 Trencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trencor has no effect on the direction of Blue Label i.e., Blue Label and Trencor go up and down completely randomly.

Pair Corralation between Blue Label and Trencor

If you would invest (100.00) in Trencor on October 22, 2024 and sell it today you would earn a total of  100.00  from holding Trencor or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Blue Label Telecoms  vs.  Trencor

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.

Trencor

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with Blue Label and Trencor

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

The idea behind Blue Label Telecoms and Trencor 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.