Correlation Between Blue Label and Mr Price

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

Diversification Opportunities for Blue Label and Mr Price

0.41

Correlation Coefficient

Blue Label  Mr Price

Very weak diversification

The 3 months correlation between Blue and MRP is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Mr Price Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Price Group 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 Mr Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Price Group has no effect on the direction of Blue Label i.e., Blue Label and Mr Price go up and down completely randomly.

Pair Corralation between Blue Label and Mr Price

Assuming the 90 days trading horizon Blue Label is expected to generate 1.18 times less return on investment than Mr Price. But when comparing it to its historical volatility, Blue Label Telecoms is 1.04 times less risky than Mr Price. It trades about 0.19 of its potential returns per unit of risk. Mr Price Group is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,362,605  in Mr Price Group on September 16, 2024 and sell it today you would earn a total of  597,395  from holding Mr Price Group or generate 25.29% return on investment over 90 days.

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

Blue Label Telecoms  vs.  Mr Price Group

Blue Label Telecoms

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 14 (%) 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.

Mr Price Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Mr Price exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Label and Mr Price

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

The idea behind Blue Label Telecoms and Mr Price Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.