Correlation Between Absa Group and Associated Banc
Can any of the company-specific risk be diversified away by investing in both Absa Group and Associated Banc 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 Absa Group and Associated Banc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absa Group Limited and Associated Banc Corp, you can compare the effects of market volatilities on Absa Group and Associated Banc 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 Absa Group with a short position of Associated Banc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Group and Associated Banc.
Diversification Opportunities for Absa Group and Associated Banc
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Absa and Associated is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Absa Group Limited and Associated Banc Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Banc Corp and Absa Group 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 Absa Group Limited are associated (or correlated) with Associated Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Banc Corp has no effect on the direction of Absa Group i.e., Absa Group and Associated Banc go up and down completely randomly.
Pair Corralation between Absa Group and Associated Banc
Assuming the 90 days horizon Absa Group Limited is expected to generate 3.96 times more return on investment than Associated Banc. However, Absa Group is 3.96 times more volatile than Associated Banc Corp. It trades about 0.04 of its potential returns per unit of risk. Associated Banc Corp is currently generating about 0.02 per unit of risk. If you would invest 383.00 in Absa Group Limited on August 24, 2024 and sell it today you would earn a total of 428.00 from holding Absa Group Limited or generate 111.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absa Group Limited vs. Associated Banc Corp
Performance |
| Timeline |
| Absa Group Limited |
| Associated Banc Corp |
Absa Group and Associated Banc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absa Group and Associated Banc
The main advantage of trading using opposite Absa Group and Associated Banc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absa Group position performs unexpectedly, Associated Banc 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 Associated Banc will offset losses from the drop in Associated Banc's long position.The idea behind Absa Group Limited and Associated Banc Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Associated Banc vs. Capital One Financial | Associated Banc vs. Capital One Financial | Associated Banc vs. Bank of America | Associated Banc vs. KeyCorp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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