Correlation Between ABSA Bank and Investec PLC
Can any of the company-specific risk be diversified away by investing in both ABSA Bank and Investec PLC 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 PLC 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 PLC, you can compare the effects of market volatilities on ABSA Bank and Investec PLC 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 PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA Bank and Investec PLC.
Diversification Opportunities for ABSA Bank and Investec PLC
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ABSA and Investec is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Investec PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec PLC 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 PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec PLC has no effect on the direction of ABSA Bank i.e., ABSA Bank and Investec PLC go up and down completely randomly.
Pair Corralation between ABSA Bank and Investec PLC
Assuming the 90 days trading horizon ABSA Bank Limited is expected to generate 0.42 times more return on investment than Investec PLC. However, ABSA Bank Limited is 2.38 times less risky than Investec PLC. It trades about 0.22 of its potential returns per unit of risk. Investec PLC is currently generating about -0.21 per unit of risk. If you would invest 8,440,100 in ABSA Bank Limited on September 5, 2024 and sell it today you would earn a total of 259,900 from holding ABSA Bank Limited or generate 3.08% 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 PLC
Performance |
| Timeline |
| ABSA Bank Limited |
| Investec PLC |
ABSA Bank and Investec PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABSA Bank and Investec PLC
The main advantage of trading using opposite ABSA Bank and Investec PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA Bank position performs unexpectedly, Investec PLC 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 PLC will offset losses from the drop in Investec PLC's long position.| ABSA Bank vs. Astral Foods | ABSA Bank vs. Master Drilling Group | ABSA Bank vs. Astoria Investments | ABSA Bank vs. AfroCentric Investment Corp |
| Investec PLC vs. CA Sales Holdings | Investec PLC vs. Bytes Technology | Investec PLC vs. RCL Foods | Investec PLC vs. Harmony Gold Mining |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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