Correlation Between AFRICAN DISTILLERS and FIRST MUTUAL
Can any of the company-specific risk be diversified away by investing in both AFRICAN DISTILLERS and FIRST MUTUAL 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 FIRST MUTUAL 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 FIRST MUTUAL PROPERTIES, you can compare the effects of market volatilities on AFRICAN DISTILLERS and FIRST MUTUAL 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 FIRST MUTUAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFRICAN DISTILLERS and FIRST MUTUAL.
Diversification Opportunities for AFRICAN DISTILLERS and FIRST MUTUAL
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between AFRICAN and FIRST is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding AFRICAN DISTILLERS LIMITED and FIRST MUTUAL PROPERTIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST MUTUAL PROPERTIES 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 FIRST MUTUAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST MUTUAL PROPERTIES has no effect on the direction of AFRICAN DISTILLERS i.e., AFRICAN DISTILLERS and FIRST MUTUAL go up and down completely randomly.
Pair Corralation between AFRICAN DISTILLERS and FIRST MUTUAL
Assuming the 90 days trading horizon AFRICAN DISTILLERS LIMITED is expected to under-perform the FIRST MUTUAL. But the stock apears to be less risky and, when comparing its historical volatility, AFRICAN DISTILLERS LIMITED is 1.47 times less risky than FIRST MUTUAL. The stock trades about -0.06 of its potential returns per unit of risk. The FIRST MUTUAL PROPERTIES is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,500 in FIRST MUTUAL PROPERTIES on November 6, 2024 and sell it today you would earn a total of 2,788 from holding FIRST MUTUAL PROPERTIES or generate 37.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AFRICAN DISTILLERS LIMITED vs. FIRST MUTUAL PROPERTIES
Performance |
| Timeline |
| AFRICAN DISTILLERS |
| FIRST MUTUAL PROPERTIES |
AFRICAN DISTILLERS and FIRST MUTUAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AFRICAN DISTILLERS and FIRST MUTUAL
The main advantage of trading using opposite AFRICAN DISTILLERS and FIRST MUTUAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AFRICAN DISTILLERS position performs unexpectedly, FIRST MUTUAL 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 FIRST MUTUAL will offset losses from the drop in FIRST MUTUAL'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 |
| FIRST MUTUAL vs. FIRST MUTUAL HOLDINGS | FIRST MUTUAL vs. STAR AFRICA PORATION | FIRST MUTUAL vs. CAFCA LIMITED | FIRST MUTUAL 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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