Correlation Between ABSA Bank and Nedbank
Can any of the company-specific risk be diversified away by investing in both ABSA Bank and Nedbank 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 Nedbank 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 Nedbank Group, you can compare the effects of market volatilities on ABSA Bank and Nedbank 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 Nedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA Bank and Nedbank.
Diversification Opportunities for ABSA Bank and Nedbank
Very weak diversification
The 3 months correlation between ABSA and Nedbank is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank 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 Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of ABSA Bank i.e., ABSA Bank and Nedbank go up and down completely randomly.
Pair Corralation between ABSA Bank and Nedbank
Assuming the 90 days trading horizon ABSA Bank Limited is expected to generate 0.49 times more return on investment than Nedbank. However, ABSA Bank Limited is 2.04 times less risky than Nedbank. It trades about 0.26 of its potential returns per unit of risk. Nedbank Group is currently generating about 0.04 per unit of risk. If you would invest 8,440,000 in ABSA Bank Limited on August 26, 2024 and sell it today you would earn a total of 270,100 from holding ABSA Bank Limited or generate 3.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABSA Bank Limited vs. Nedbank Group
Performance |
| Timeline |
| ABSA Bank Limited |
| Nedbank Group |
ABSA Bank and Nedbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABSA Bank and Nedbank
The main advantage of trading using opposite ABSA Bank and Nedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA Bank position performs unexpectedly, Nedbank 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 Nedbank will offset losses from the drop in Nedbank's long position.| ABSA Bank vs. Lesaka Technologies | ABSA Bank vs. Kumba Iron Ore | ABSA Bank vs. eMedia Holdings Limited | ABSA Bank vs. Advtech |
| Nedbank vs. Afine Investments | Nedbank vs. ABSA Bank Limited | Nedbank vs. Trematon Capital Investments | Nedbank vs. CA Sales Holdings |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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