Correlation Between AFRICAN DISTILLERS and STAR AFRICA
Can any of the company-specific risk be diversified away by investing in both AFRICAN DISTILLERS and STAR AFRICA 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 STAR AFRICA 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 STAR AFRICA PORATION, you can compare the effects of market volatilities on AFRICAN DISTILLERS and STAR AFRICA 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 STAR AFRICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of AFRICAN DISTILLERS and STAR AFRICA.
Diversification Opportunities for AFRICAN DISTILLERS and STAR AFRICA
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AFRICAN and STAR is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AFRICAN DISTILLERS LIMITED and STAR AFRICA PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAR AFRICA PORATION 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 STAR AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAR AFRICA PORATION has no effect on the direction of AFRICAN DISTILLERS i.e., AFRICAN DISTILLERS and STAR AFRICA go up and down completely randomly.
Pair Corralation between AFRICAN DISTILLERS and STAR AFRICA
Assuming the 90 days trading horizon AFRICAN DISTILLERS is expected to generate 39.88 times less return on investment than STAR AFRICA. But when comparing it to its historical volatility, AFRICAN DISTILLERS LIMITED is 2.21 times less risky than STAR AFRICA. It trades about 0.01 of its potential returns per unit of risk. STAR AFRICA PORATION is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 100.00 in STAR AFRICA PORATION on August 30, 2024 and sell it today you would earn a total of 132.00 from holding STAR AFRICA PORATION or generate 132.0% 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. STAR AFRICA PORATION
Performance |
| Timeline |
| AFRICAN DISTILLERS |
| STAR AFRICA PORATION |
AFRICAN DISTILLERS and STAR AFRICA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AFRICAN DISTILLERS and STAR AFRICA
The main advantage of trading using opposite AFRICAN DISTILLERS and STAR AFRICA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AFRICAN DISTILLERS position performs unexpectedly, STAR AFRICA 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 STAR AFRICA will offset losses from the drop in STAR AFRICA'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 |
| STAR AFRICA vs. CAFCA LIMITED | STAR AFRICA vs. FIRST MUTUAL PROPERTIES | STAR AFRICA vs. AFRICAN DISTILLERS LIMITED | STAR AFRICA vs. TANGANDA TEA PANY |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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