Correlation Between AFRICAN DISTILLERS and ECONET WIRELESS
Can any of the company-specific risk be diversified away by investing in both AFRICAN DISTILLERS and ECONET WIRELESS 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 DISTILLERS and ECONET WIRELESS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AFRICAN DISTILLERS LIMITED and ECONET WIRELESS HOLDINGS, you can compare the effects of market volatilities on AFRICAN DISTILLERS and ECONET WIRELESS 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 DISTILLERS with a short position of ECONET WIRELESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFRICAN DISTILLERS and ECONET WIRELESS.
Diversification Opportunities for AFRICAN DISTILLERS and ECONET WIRELESS
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between AFRICAN and ECONET is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding AFRICAN DISTILLERS LIMITED and ECONET WIRELESS HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECONET WIRELESS HOLDINGS and AFRICAN DISTILLERS 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 DISTILLERS LIMITED are associated (or correlated) with ECONET WIRELESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECONET WIRELESS HOLDINGS has no effect on the direction of AFRICAN DISTILLERS i.e., AFRICAN DISTILLERS and ECONET WIRELESS go up and down completely randomly.
Pair Corralation between AFRICAN DISTILLERS and ECONET WIRELESS
Assuming the 90 days trading horizon AFRICAN DISTILLERS is expected to generate 1.43 times less return on investment than ECONET WIRELESS. But when comparing it to its historical volatility, AFRICAN DISTILLERS LIMITED is 1.17 times less risky than ECONET WIRELESS. It trades about 0.07 of its potential returns per unit of risk. ECONET WIRELESS HOLDINGS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,879,310 in ECONET WIRELESS HOLDINGS on September 14, 2024 and sell it today you would lose (6,848,915) from holding ECONET WIRELESS HOLDINGS or give up 99.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AFRICAN DISTILLERS LIMITED vs. ECONET WIRELESS HOLDINGS
Performance |
| Timeline |
| AFRICAN DISTILLERS |
| ECONET WIRELESS HOLDINGS |
AFRICAN DISTILLERS and ECONET WIRELESS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AFRICAN DISTILLERS and ECONET WIRELESS
The main advantage of trading using opposite AFRICAN DISTILLERS and ECONET WIRELESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AFRICAN DISTILLERS position performs unexpectedly, ECONET WIRELESS 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 ECONET WIRELESS will offset losses from the drop in ECONET WIRELESS's long position.| AFRICAN DISTILLERS vs. FIRST MUTUAL PROPERTIES | AFRICAN DISTILLERS vs. BRITISH AMERICAN TOBACCO | AFRICAN DISTILLERS vs. TANGANDA TEA PANY | AFRICAN DISTILLERS vs. ZB FINANCIAL HOLDINGS |
| ECONET WIRELESS vs. STAR AFRICA PORATION | ECONET WIRELESS vs. CAFCA LIMITED | ECONET WIRELESS vs. FIRST MUTUAL PROPERTIES | ECONET WIRELESS vs. AFRICAN DISTILLERS 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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