Correlation Between African Media and ABSA Bank
Can any of the company-specific risk be diversified away by investing in both African Media and ABSA Bank 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 Media and ABSA Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Media Entertainment and ABSA Bank Limited, you can compare the effects of market volatilities on African Media and ABSA Bank 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 Media with a short position of ABSA Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Media and ABSA Bank.
Diversification Opportunities for African Media and ABSA Bank
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between African and ABSA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding African Media Entertainment and ABSA Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA Bank Limited and African Media 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 Media Entertainment are associated (or correlated) with ABSA Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA Bank Limited has no effect on the direction of African Media i.e., African Media and ABSA Bank go up and down completely randomly.
Pair Corralation between African Media and ABSA Bank
Assuming the 90 days trading horizon African Media Entertainment is expected to under-perform the ABSA Bank. In addition to that, African Media is 7.01 times more volatile than ABSA Bank Limited. It trades about -0.07 of its total potential returns per unit of risk. ABSA Bank Limited is currently generating about 0.22 per unit of volatility. If you would invest 8,580,000 in ABSA Bank Limited on August 27, 2024 and sell it today you would earn a total of 190,200 from holding ABSA Bank Limited or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
African Media Entertainment vs. ABSA Bank Limited
Performance |
| Timeline |
| African Media Entert |
| ABSA Bank Limited |
African Media and ABSA Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Media and ABSA Bank
The main advantage of trading using opposite African Media and ABSA Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Media position performs unexpectedly, ABSA Bank 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 ABSA Bank will offset losses from the drop in ABSA Bank's long position.| African Media vs. Sasol Ltd Bee | African Media vs. Growthpoint Properties | African Media vs. AfricaRhodium ETF | African Media vs. CoreShares Preference Share |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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