Correlation Between Absa and DRA Global
Can any of the company-specific risk be diversified away by investing in both Absa and DRA Global 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 Absa and DRA Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absa Group and DRA Global, you can compare the effects of market volatilities on Absa and DRA Global 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 Absa with a short position of DRA Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa and DRA Global.
Diversification Opportunities for Absa and DRA Global
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Absa and DRA is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Absa Group and DRA Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRA Global and Absa 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 Absa Group are associated (or correlated) with DRA Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRA Global has no effect on the direction of Absa i.e., Absa and DRA Global go up and down completely randomly.
Pair Corralation between Absa and DRA Global
Assuming the 90 days trading horizon Absa Group is expected to generate 0.77 times more return on investment than DRA Global. However, Absa Group is 1.31 times less risky than DRA Global. It trades about 0.08 of its potential returns per unit of risk. DRA Global is currently generating about -0.01 per unit of risk. If you would invest 1,412,647 in Absa Group on September 3, 2024 and sell it today you would earn a total of 312,353 from holding Absa Group or generate 22.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absa Group vs. DRA Global
Performance |
| Timeline |
| Absa Group |
| DRA Global |
Absa and DRA Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absa and DRA Global
The main advantage of trading using opposite Absa and DRA Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absa position performs unexpectedly, DRA Global 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 DRA Global will offset losses from the drop in DRA Global's long position.The idea behind Absa Group and DRA Global 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.| DRA Global vs. Frontier Transport Holdings | DRA Global vs. Reinet Investments SCA | DRA Global vs. Brimstone Investment | DRA Global vs. City Lodge Hotels |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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