Correlation Between Blue Label and Reinet Investments

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

Diversification Opportunities for Blue Label and Reinet Investments

0.22

Correlation Coefficient

Blue Label  Reinet Investments

Modest diversification

The 3 months correlation between Blue and Reinet is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Reinet Investments SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinet Investments SCA 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 Reinet Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinet Investments SCA has no effect on the direction of Blue Label i.e., Blue Label and Reinet Investments go up and down completely randomly.

Pair Corralation between Blue Label and Reinet Investments

Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 1.44 times more return on investment than Reinet Investments. However, Blue Label is 1.44 times more volatile than Reinet Investments SCA. It trades about 0.19 of its potential returns per unit of risk. Reinet Investments SCA is currently generating about -0.01 per unit of risk. If you would invest  48,200  in Blue Label Telecoms on September 14, 2024 and sell it today you would earn a total of  9,800  from holding Blue Label Telecoms or generate 20.33% return on investment over 90 days.

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

Blue Label Telecoms  vs.  Reinet Investments SCA

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.

Reinet Investments SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Blue Label and Reinet Investments

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

The idea behind Blue Label Telecoms and Reinet Investments SCA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.