Correlation Between AFRICAN DISTILLERS and FBC HOLDINGS
Can any of the company-specific risk be diversified away by investing in both AFRICAN DISTILLERS and FBC HOLDINGS 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 FBC HOLDINGS 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 FBC HOLDINGS LIMITED, you can compare the effects of market volatilities on AFRICAN DISTILLERS and FBC HOLDINGS 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 FBC HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFRICAN DISTILLERS and FBC HOLDINGS.
Diversification Opportunities for AFRICAN DISTILLERS and FBC HOLDINGS
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AFRICAN and FBC is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding AFRICAN DISTILLERS LIMITED and FBC HOLDINGS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FBC HOLDINGS LIMITED 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 FBC HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FBC HOLDINGS LIMITED has no effect on the direction of AFRICAN DISTILLERS i.e., AFRICAN DISTILLERS and FBC HOLDINGS go up and down completely randomly.
Pair Corralation between AFRICAN DISTILLERS and FBC HOLDINGS
Assuming the 90 days trading horizon AFRICAN DISTILLERS is expected to generate 32.47 times less return on investment than FBC HOLDINGS. But when comparing it to its historical volatility, AFRICAN DISTILLERS LIMITED is 1.46 times less risky than FBC HOLDINGS. It trades about 0.01 of its potential returns per unit of risk. FBC HOLDINGS LIMITED is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 57,000 in FBC HOLDINGS LIMITED on August 31, 2024 and sell it today you would earn a total of 63,000 from holding FBC HOLDINGS LIMITED or generate 110.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AFRICAN DISTILLERS LIMITED vs. FBC HOLDINGS LIMITED
Performance |
| Timeline |
| AFRICAN DISTILLERS |
| FBC HOLDINGS LIMITED |
AFRICAN DISTILLERS and FBC HOLDINGS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AFRICAN DISTILLERS and FBC HOLDINGS
The main advantage of trading using opposite AFRICAN DISTILLERS and FBC HOLDINGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AFRICAN DISTILLERS position performs unexpectedly, FBC HOLDINGS 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 FBC HOLDINGS will offset losses from the drop in FBC HOLDINGS's long position.| AFRICAN DISTILLERS vs. STAR AFRICA PORATION | AFRICAN DISTILLERS vs. CAFCA LIMITED | AFRICAN DISTILLERS vs. FIRST MUTUAL PROPERTIES | AFRICAN DISTILLERS vs. TANGANDA TEA PANY |
| FBC HOLDINGS vs. STAR AFRICA PORATION | FBC HOLDINGS vs. CAFCA LIMITED | FBC HOLDINGS vs. FIRST MUTUAL PROPERTIES | FBC HOLDINGS 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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