Correlation Between Afine Investments and Investec PLC

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Can any of the company-specific risk be diversified away by investing in both Afine Investments and Investec PLC 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 Afine Investments and Investec PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Afine Investments and Investec PLC, you can compare the effects of market volatilities on Afine Investments and Investec PLC 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 Afine Investments with a short position of Investec PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afine Investments and Investec PLC.

Diversification Opportunities for Afine Investments and Investec PLC

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Afine and Investec is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Afine Investments and Investec PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec PLC and Afine Investments 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 Afine Investments are associated (or correlated) with Investec PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec PLC has no effect on the direction of Afine Investments i.e., Afine Investments and Investec PLC go up and down completely randomly.

Pair Corralation between Afine Investments and Investec PLC

Assuming the 90 days trading horizon Afine Investments is expected to generate 1.85 times more return on investment than Investec PLC. However, Afine Investments is 1.85 times more volatile than Investec PLC. It trades about 0.22 of its potential returns per unit of risk. Investec PLC is currently generating about -0.2 per unit of risk. If you would invest  40,000  in Afine Investments on September 2, 2024 and sell it today you would earn a total of  5,000  from holding Afine Investments or generate 12.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

Afine Investments  vs.  Investec PLC

 Performance 
       Timeline  
Afine Investments 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Afine Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Afine Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Investec PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Investec PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investec PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Afine Investments and Investec PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Afine Investments and Investec PLC

The main advantage of trading using opposite Afine Investments and Investec PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afine Investments position performs unexpectedly, Investec PLC 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 Investec PLC will offset losses from the drop in Investec PLC's long position.
The idea behind Afine Investments and Investec PLC 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.
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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