Correlation Between ABSA Bank and Investec
Can any of the company-specific risk be diversified away by investing in both ABSA Bank and Investec 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 Investec 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 Investec, you can compare the effects of market volatilities on ABSA Bank and Investec 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 Investec. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA Bank and Investec.
Diversification Opportunities for ABSA Bank and Investec
Modest diversification
The 3 months correlation between ABSA and Investec is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Investec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec has no effect on the direction of ABSA Bank i.e., ABSA Bank and Investec go up and down completely randomly.
Pair Corralation between ABSA Bank and Investec
Assuming the 90 days trading horizon ABSA Bank Limited is expected to generate 0.34 times more return on investment than Investec. However, ABSA Bank Limited is 2.9 times less risky than Investec. It trades about 0.18 of its potential returns per unit of risk. Investec is currently generating about -0.2 per unit of risk. If you would invest 8,500,000 in ABSA Bank Limited on September 2, 2024 and sell it today you would earn a total of 180,000 from holding ABSA Bank Limited or generate 2.12% 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. Investec
Performance |
| Timeline |
| ABSA Bank Limited |
| Investec |
ABSA Bank and Investec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABSA Bank and Investec
The main advantage of trading using opposite ABSA Bank and Investec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA Bank position performs unexpectedly, Investec 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 Investec will offset losses from the drop in Investec's long position.| ABSA Bank vs. Reinet Investments SCA | ABSA Bank vs. Safari Investments RSA | ABSA Bank vs. Harmony Gold Mining | ABSA Bank vs. Blue Label Telecoms |
| Investec vs. ABSA Bank Limited | Investec vs. Capitec Bank Holdings | Investec vs. Standard Bank Group | Investec vs. Absa Group |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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