Correlation Between American Funds and EAST AFRICAN
Can any of the company-specific risk be diversified away by investing in both American Funds and EAST AFRICAN 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 American Funds and EAST AFRICAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and EAST AFRICAN BREWERIES, you can compare the effects of market volatilities on American Funds and EAST AFRICAN 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 American Funds with a short position of EAST AFRICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and EAST AFRICAN.
Diversification Opportunities for American Funds and EAST AFRICAN
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and EAST is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and EAST AFRICAN BREWERIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAST AFRICAN BREWERIES and American Funds 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 American Funds Fundamental are associated (or correlated) with EAST AFRICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAST AFRICAN BREWERIES has no effect on the direction of American Funds i.e., American Funds and EAST AFRICAN go up and down completely randomly.
Pair Corralation between American Funds and EAST AFRICAN
Assuming the 90 days horizon American Funds is expected to generate 1.26 times less return on investment than EAST AFRICAN. But when comparing it to its historical volatility, American Funds Fundamental is 1.85 times less risky than EAST AFRICAN. It trades about 0.2 of its potential returns per unit of risk. EAST AFRICAN BREWERIES is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 328,000 in EAST AFRICAN BREWERIES on October 24, 2024 and sell it today you would earn a total of 14,000 from holding EAST AFRICAN BREWERIES or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
American Funds Fundamental vs. EAST AFRICAN BREWERIES
Performance |
| Timeline |
| American Funds Funda |
| EAST AFRICAN BREWERIES |
American Funds and EAST AFRICAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and EAST AFRICAN
The main advantage of trading using opposite American Funds and EAST AFRICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, EAST AFRICAN 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 EAST AFRICAN will offset losses from the drop in EAST AFRICAN's long position.| American Funds vs. Virtus High Yield | American Funds vs. Ab High Income | American Funds vs. Multi Manager High Yield | American Funds vs. Ab High Income |
| EAST AFRICAN vs. NATION MEDIA GROUP | EAST AFRICAN vs. MKOMBOZI MERCIAL BANK | EAST AFRICAN vs. NATIONAL INVESTMENT PANY | EAST AFRICAN vs. JATU PLC |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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