Correlation Between African Discovery and Multi Ways
Can any of the company-specific risk be diversified away by investing in both African Discovery and Multi Ways 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 African Discovery and Multi Ways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Discovery Group and Multi Ways Holdings, you can compare the effects of market volatilities on African Discovery and Multi Ways 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 African Discovery with a short position of Multi Ways. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Discovery and Multi Ways.
Diversification Opportunities for African Discovery and Multi Ways
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between African and Multi is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding African Discovery Group and Multi Ways Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Ways Holdings and African Discovery 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 African Discovery Group are associated (or correlated) with Multi Ways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Ways Holdings has no effect on the direction of African Discovery i.e., African Discovery and Multi Ways go up and down completely randomly.
Pair Corralation between African Discovery and Multi Ways
Given the investment horizon of 90 days African Discovery Group is expected to generate 2.1 times more return on investment than Multi Ways. However, African Discovery is 2.1 times more volatile than Multi Ways Holdings. It trades about 0.05 of its potential returns per unit of risk. Multi Ways Holdings is currently generating about -0.04 per unit of risk. If you would invest 6.00 in African Discovery Group on October 21, 2024 and sell it today you would lose (4.60) from holding African Discovery Group or give up 76.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.13% |
| Values | Daily Returns |
African Discovery Group vs. Multi Ways Holdings
Performance |
| Timeline |
| African Discovery |
| Multi Ways Holdings |
African Discovery and Multi Ways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Discovery and Multi Ways
The main advantage of trading using opposite African Discovery and Multi Ways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Discovery position performs unexpectedly, Multi Ways 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 Multi Ways will offset losses from the drop in Multi Ways' long position.| African Discovery vs. Black Diamond Group | African Discovery vs. Alta Equipment Group | African Discovery vs. Ashtead Group plc | African Discovery vs. BOC Aviation Limited |
| Multi Ways vs. FlexShopper | Multi Ways vs. Hertz Global Holdings | Multi Ways vs. HyreCar | Multi Ways vs. Avis Budget Group |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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