Correlation Between Abak SA and Vee SA
Can any of the company-specific risk be diversified away by investing in both Abak SA and Vee SA 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 Abak SA and Vee SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abak SA and Vee SA, you can compare the effects of market volatilities on Abak SA and Vee SA 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 Abak SA with a short position of Vee SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abak SA and Vee SA.
Diversification Opportunities for Abak SA and Vee SA
Modest diversification
The 3 months correlation between Abak and Vee is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Abak SA and Vee SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vee SA and Abak SA 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 Abak SA are associated (or correlated) with Vee SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vee SA has no effect on the direction of Abak SA i.e., Abak SA and Vee SA go up and down completely randomly.
Pair Corralation between Abak SA and Vee SA
Assuming the 90 days trading horizon Abak SA is expected to generate 0.66 times more return on investment than Vee SA. However, Abak SA is 1.51 times less risky than Vee SA. It trades about -0.17 of its potential returns per unit of risk. Vee SA is currently generating about -0.64 per unit of risk. If you would invest 380.00 in Abak SA on September 19, 2024 and sell it today you would lose (10.00) from holding Abak SA or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 40.91% |
| Values | Daily Returns |
Abak SA vs. Vee SA
Performance |
| Timeline |
| Abak SA |
| Vee SA |
Abak SA and Vee SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abak SA and Vee SA
The main advantage of trading using opposite Abak SA and Vee SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abak SA position performs unexpectedly, Vee SA 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 Vee SA will offset losses from the drop in Vee SA's long position.The idea behind Abak SA and Vee SA 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.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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