Correlation Between African Media and RCL Foods
Can any of the company-specific risk be diversified away by investing in both African Media and RCL Foods 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 RCL Foods 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 RCL Foods, you can compare the effects of market volatilities on African Media and RCL Foods 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 RCL Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Media and RCL Foods.
Diversification Opportunities for African Media and RCL Foods
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between African and RCL is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding African Media Entertainment and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods 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 RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of African Media i.e., African Media and RCL Foods go up and down completely randomly.
Pair Corralation between African Media and RCL Foods
Assuming the 90 days trading horizon African Media Entertainment is expected to generate 14.78 times more return on investment than RCL Foods. However, African Media is 14.78 times more volatile than RCL Foods. It trades about 0.04 of its potential returns per unit of risk. RCL Foods is currently generating about 0.01 per unit of risk. If you would invest 305,067 in African Media Entertainment on September 3, 2024 and sell it today you would earn a total of 94,933 from holding African Media Entertainment or generate 31.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
African Media Entertainment vs. RCL Foods
Performance |
| Timeline |
| African Media Entert |
| RCL Foods |
African Media and RCL Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Media and RCL Foods
The main advantage of trading using opposite African Media and RCL Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Media position performs unexpectedly, RCL Foods 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 RCL Foods will offset losses from the drop in RCL Foods' long position.| African Media vs. Sasol Ltd Bee | African Media vs. Centaur Bci Balanced | African Media vs. Sabvest Capital | African Media vs. Growthpoint Properties |
| RCL Foods vs. Blue Label Telecoms | RCL Foods vs. African Media Entertainment | RCL Foods vs. Life Healthcare | RCL Foods vs. Kap Industrial Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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