Correlation Between Blue Label and Trematon Capital

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

Diversification Opportunities for Blue Label and Trematon Capital

-0.5

Correlation Coefficient

Blue Label  Trematon Capital

Very good diversification

The 3 months correlation between Blue and Trematon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms and Trematon Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trematon Capital Inv 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 Trematon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trematon Capital Inv has no effect on the direction of Blue Label i.e., Blue Label and Trematon Capital go up and down completely randomly.

Pair Corralation between Blue Label and Trematon Capital

Assuming the 90 days trading horizon Blue Label Telecoms is expected to generate 0.43 times more return on investment than Trematon Capital. However, Blue Label Telecoms is 2.31 times less risky than Trematon Capital. It trades about 0.19 of its potential returns per unit of risk. Trematon Capital Investments is currently generating about -0.09 per unit of risk. If you would invest  48,200  in Blue Label Telecoms on September 16, 2024 and sell it today you would earn a total of  10,100  from holding Blue Label Telecoms or generate 20.95% return on investment over 90 days.

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

Blue Label Telecoms  vs.  Trematon Capital Investments

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.

Trematon Capital Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trematon Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Blue Label and Trematon Capital

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

The idea behind Blue Label Telecoms and Trematon Capital Investments 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.