Correlation Between ABSA Bank and Advtech
Can any of the company-specific risk be diversified away by investing in both ABSA Bank and Advtech 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 Bank and Advtech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABSA Bank Limited and Advtech, you can compare the effects of market volatilities on ABSA Bank and Advtech 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 Bank with a short position of Advtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA Bank and Advtech.
Diversification Opportunities for ABSA Bank and Advtech
Modest diversification
The 3 months correlation between ABSA and Advtech is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech and ABSA Bank 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 Bank Limited are associated (or correlated) with Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of ABSA Bank i.e., ABSA Bank and Advtech go up and down completely randomly.
Pair Corralation between ABSA Bank and Advtech
Assuming the 90 days trading horizon ABSA Bank is expected to generate 4.47 times less return on investment than Advtech. But when comparing it to its historical volatility, ABSA Bank Limited is 1.37 times less risky than Advtech. It trades about 0.04 of its potential returns per unit of risk. Advtech is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 173,000 in Advtech on August 31, 2024 and sell it today you would earn a total of 158,000 from holding Advtech or generate 91.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABSA Bank Limited vs. Advtech
Performance |
| Timeline |
| ABSA Bank Limited |
| Advtech |
ABSA Bank and Advtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABSA Bank and Advtech
The main advantage of trading using opposite ABSA Bank and Advtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA Bank position performs unexpectedly, Advtech 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 Advtech will offset losses from the drop in Advtech's long position.| ABSA Bank vs. Bytes Technology | ABSA Bank vs. Hosken Consolidated Investments | ABSA Bank vs. CA Sales Holdings | ABSA Bank vs. Trematon Capital Investments |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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