Correlation Between Brimstone Investment and Blue Label

Can any of the company-specific risk be diversified away by investing in both Brimstone Investment and Blue Label 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 Brimstone Investment and Blue Label into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brimstone Investment and Blue Label Telecoms, you can compare the effects of market volatilities on Brimstone Investment and Blue Label 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 Brimstone Investment with a short position of Blue Label. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brimstone Investment and Blue Label.

Diversification Opportunities for Brimstone Investment and Blue Label

-0.08

Correlation Coefficient

Brimstone Investment  Blue Label

Good diversification

The 3 months correlation between Brimstone and Blue is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Brimstone Investment and Blue Label Telecoms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Label Telecoms and Brimstone Investment 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 Brimstone Investment are associated (or correlated) with Blue Label. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Label Telecoms has no effect on the direction of Brimstone Investment i.e., Brimstone Investment and Blue Label go up and down completely randomly.

Pair Corralation between Brimstone Investment and Blue Label

Assuming the 90 days trading horizon Brimstone Investment is expected to under-perform the Blue Label. But the stock apears to be less risky and, when comparing its historical volatility, Brimstone Investment is 1.05 times less risky than Blue Label. The stock trades about -0.08 of its potential returns per unit of risk. The Blue Label Telecoms is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  54,500  in Blue Label Telecoms on December 2, 2024 and sell it today you would earn a total of  21,200  from holding Blue Label Telecoms or generate 38.9% return on investment over 90 days.

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

Brimstone Investment  vs.  Blue Label Telecoms

Brimstone Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brimstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 22 (%) 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.

Pair Trading with Brimstone Investment and Blue Label

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

The idea behind Brimstone Investment and Blue Label Telecoms 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.