Correlation Between African Discovery and Solution Financial
Can any of the company-specific risk be diversified away by investing in both African Discovery and Solution Financial 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 Solution Financial 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 Solution Financial, you can compare the effects of market volatilities on African Discovery and Solution Financial 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 Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Discovery and Solution Financial.
Diversification Opportunities for African Discovery and Solution Financial
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between African and Solution is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding African Discovery Group and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of African Discovery i.e., African Discovery and Solution Financial go up and down completely randomly.
Pair Corralation between African Discovery and Solution Financial
Given the investment horizon of 90 days African Discovery Group is expected to generate 6.55 times more return on investment than Solution Financial. However, African Discovery is 6.55 times more volatile than Solution Financial. It trades about 0.15 of its potential returns per unit of risk. Solution Financial is currently generating about -0.09 per unit of risk. If you would invest 0.70 in African Discovery Group on November 2, 2024 and sell it today you would earn a total of 0.20 from holding African Discovery Group or generate 28.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
African Discovery Group vs. Solution Financial
Performance |
| Timeline |
| African Discovery |
| Solution Financial |
African Discovery and Solution Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Discovery and Solution Financial
The main advantage of trading using opposite African Discovery and Solution Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Discovery position performs unexpectedly, Solution Financial 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 Solution Financial will offset losses from the drop in Solution Financial's 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 |
| Solution Financial vs. Ashtead Group plc | Solution Financial vs. African Discovery Group | Solution Financial vs. Emeco Holdings Limited | Solution Financial vs. BOC Aviation Limited |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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