Correlation Between African Rainbow and Kap Industrial
Can any of the company-specific risk be diversified away by investing in both African Rainbow and Kap Industrial 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 Rainbow and Kap Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Rainbow Capital and Kap Industrial Holdings, you can compare the effects of market volatilities on African Rainbow and Kap Industrial 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 Rainbow with a short position of Kap Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Rainbow and Kap Industrial.
Diversification Opportunities for African Rainbow and Kap Industrial
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between African and Kap is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Capital and Kap Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kap Industrial Holdings and African Rainbow 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 Rainbow Capital are associated (or correlated) with Kap Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kap Industrial Holdings has no effect on the direction of African Rainbow i.e., African Rainbow and Kap Industrial go up and down completely randomly.
Pair Corralation between African Rainbow and Kap Industrial
Assuming the 90 days trading horizon African Rainbow Capital is expected to generate 0.95 times more return on investment than Kap Industrial. However, African Rainbow Capital is 1.05 times less risky than Kap Industrial. It trades about 0.02 of its potential returns per unit of risk. Kap Industrial Holdings is currently generating about 0.01 per unit of risk. If you would invest 70,900 in African Rainbow Capital on December 5, 2024 and sell it today you would earn a total of 9,400 from holding African Rainbow Capital or generate 13.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
African Rainbow Capital vs. Kap Industrial Holdings
Performance |
| Timeline |
| African Rainbow Capital |
| Kap Industrial Holdings |
African Rainbow and Kap Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Rainbow and Kap Industrial
The main advantage of trading using opposite African Rainbow and Kap Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Rainbow position performs unexpectedly, Kap Industrial 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 Kap Industrial will offset losses from the drop in Kap Industrial's long position.| African Rainbow vs. Frontier Transport Holdings | ||
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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