Correlation Between CoreShares Preference and Blue Label

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

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

Diversification Opportunities for CoreShares Preference and Blue Label

0.0

Correlation Coefficient

CoreShares Preference  Blue Label

Pay attention - limited upside

The 3 months correlation between CoreShares and Blue is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CoreShares Preference Share 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 CoreShares Preference 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 CoreShares Preference Share 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 CoreShares Preference i.e., CoreShares Preference and Blue Label go up and down completely randomly.

Pair Corralation between CoreShares Preference and Blue Label

Assuming the 90 days trading horizon CoreShares Preference is expected to generate 18.66 times less return on investment than Blue Label. But when comparing it to its historical volatility, CoreShares Preference Share is 10.36 times less risky than Blue Label. It trades about 0.06 of its potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  34,000  in Blue Label Telecoms on October 24, 2024 and sell it today you would earn a total of  23,300  from holding Blue Label Telecoms or generate 68.53% return on investment over 90 days.

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

CoreShares Preference Share  vs.  Blue Label Telecoms

CoreShares Preference

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CoreShares Preference Share has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, CoreShares Preference is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blue Label Telecoms

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with CoreShares Preference and Blue Label

The main advantage of trading using opposite CoreShares Preference and Blue Label positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CoreShares Preference 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 CoreShares Preference Share 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.