Correlation Between Blue Label and AECI

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

Diversification Opportunities for Blue Label and AECI

0.08

Correlation Coefficient

Blue Label  AECI

Significant diversification

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

Pair Corralation between Blue Label and AECI

Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 1.13 times more return on investment than AECI. However, Blue Label is 1.13 times more volatile than AECI. It trades about 0.08 of its potential returns per unit of risk. AECI is currently generating about 0.02 per unit of risk. If you would invest  49,300  in Blue Label Telecoms on September 1, 2024 and sell it today you would earn a total of  3,900  from holding Blue Label Telecoms or generate 7.91% return on investment over 90 days.

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

Blue Label Telecoms  vs.  AECI

Blue Label Telecoms

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Label may actually be approaching a critical reversion point that can send shares even higher in December 2024.

AECI

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AECI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AECI is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Blue Label and AECI

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

The idea behind Blue Label Telecoms and AECI 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.