Correlation Between AfroCentric Investment and African Rainbow
Can any of the company-specific risk be diversified away by investing in both AfroCentric Investment and African Rainbow 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 AfroCentric Investment and African Rainbow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AfroCentric Investment Corp and African Rainbow Minerals, you can compare the effects of market volatilities on AfroCentric Investment and African Rainbow 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 AfroCentric Investment with a short position of African Rainbow. Check out your portfolio center. Please also check ongoing floating volatility patterns of AfroCentric Investment and African Rainbow.
Diversification Opportunities for AfroCentric Investment and African Rainbow
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between AfroCentric and African is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AfroCentric Investment Corp and African Rainbow Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Rainbow Minerals and AfroCentric Investment 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 AfroCentric Investment Corp are associated (or correlated) with African Rainbow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Rainbow Minerals has no effect on the direction of AfroCentric Investment i.e., AfroCentric Investment and African Rainbow go up and down completely randomly.
Pair Corralation between AfroCentric Investment and African Rainbow
Assuming the 90 days trading horizon AfroCentric Investment Corp is expected to under-perform the African Rainbow. In addition to that, AfroCentric Investment is 3.11 times more volatile than African Rainbow Minerals. It trades about -0.22 of its total potential returns per unit of risk. African Rainbow Minerals is currently generating about -0.26 per unit of volatility. If you would invest 1,789,700 in African Rainbow Minerals on September 5, 2024 and sell it today you would lose (181,500) from holding African Rainbow Minerals or give up 10.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AfroCentric Investment Corp vs. African Rainbow Minerals
Performance |
| Timeline |
| AfroCentric Investment |
| African Rainbow Minerals |
AfroCentric Investment and African Rainbow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AfroCentric Investment and African Rainbow
The main advantage of trading using opposite AfroCentric Investment and African Rainbow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AfroCentric Investment position performs unexpectedly, African Rainbow 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 African Rainbow will offset losses from the drop in African Rainbow's long position.| AfroCentric Investment vs. Bytes Technology | AfroCentric Investment vs. Astral Foods | AfroCentric Investment vs. Afine Investments | AfroCentric Investment vs. British American Tobacco |
| African Rainbow vs. AfroCentric Investment Corp | African Rainbow vs. Reinet Investments SCA | African Rainbow vs. Frontier Transport Holdings | African Rainbow vs. Zeder Investments |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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