Correlation Between ABSA Bank and MTN
Can any of the company-specific risk be diversified away by investing in both ABSA Bank and MTN 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 MTN 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 MTN Group, you can compare the effects of market volatilities on ABSA Bank and MTN 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 MTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA Bank and MTN.
Diversification Opportunities for ABSA Bank and MTN
Pay attention - limited upside
The 3 months correlation between ABSA and MTN is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and MTN Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group 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 MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of ABSA Bank i.e., ABSA Bank and MTN go up and down completely randomly.
Pair Corralation between ABSA Bank and MTN
Assuming the 90 days trading horizon ABSA Bank Limited is expected to generate 0.54 times more return on investment than MTN. However, ABSA Bank Limited is 1.86 times less risky than MTN. It trades about 0.13 of its potential returns per unit of risk. MTN Group is currently generating about -0.3 per unit of risk. If you would invest 8,549,900 in ABSA Bank Limited on August 24, 2024 and sell it today you would earn a total of 170,000 from holding ABSA Bank Limited or generate 1.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABSA Bank Limited vs. MTN Group
Performance |
| Timeline |
| ABSA Bank Limited |
| MTN Group |
ABSA Bank and MTN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABSA Bank and MTN
The main advantage of trading using opposite ABSA Bank and MTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA Bank position performs unexpectedly, MTN 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 MTN will offset losses from the drop in MTN's long position.| ABSA Bank vs. Allied Electronics | ABSA Bank vs. Astral Foods | ABSA Bank vs. Trematon Capital Investments | ABSA Bank vs. Astoria Investments |
| MTN vs. Reinet Investments SCA | MTN vs. Hosken Consolidated Investments | MTN vs. Standard Bank Group | MTN vs. Brimstone 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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