Correlation Between Advtech and ABSA Bank
Can any of the company-specific risk be diversified away by investing in both Advtech and ABSA Bank 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 Advtech and ABSA Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advtech and ABSA Bank Limited, you can compare the effects of market volatilities on Advtech and ABSA Bank 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 Advtech with a short position of ABSA Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advtech and ABSA Bank.
Diversification Opportunities for Advtech and ABSA Bank
Significant diversification
The 3 months correlation between Advtech and ABSA is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Advtech and ABSA Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA Bank Limited and Advtech 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 Advtech are associated (or correlated) with ABSA Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA Bank Limited has no effect on the direction of Advtech i.e., Advtech and ABSA Bank go up and down completely randomly.
Pair Corralation between Advtech and ABSA Bank
Assuming the 90 days trading horizon Advtech is expected to generate 1.18 times more return on investment than ABSA Bank. However, Advtech is 1.18 times more volatile than ABSA Bank Limited. It trades about 0.09 of its potential returns per unit of risk. ABSA Bank Limited is currently generating about 0.01 per unit of risk. If you would invest 176,444 in Advtech on August 30, 2024 and sell it today you would earn a total of 152,556 from holding Advtech or generate 86.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advtech vs. ABSA Bank Limited
Performance |
| Timeline |
| Advtech |
| ABSA Bank Limited |
Advtech and ABSA Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advtech and ABSA Bank
The main advantage of trading using opposite Advtech and ABSA Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advtech position performs unexpectedly, ABSA Bank 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 ABSA Bank will offset losses from the drop in ABSA Bank's long position.| Advtech vs. Reinet Investments SCA | Advtech vs. Safari Investments RSA | Advtech vs. Brimstone Investment | Advtech vs. HomeChoice Investments |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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