Correlation Between ABSA BANK and CIC INSURANCE
Can any of the company-specific risk be diversified away by investing in both ABSA BANK and CIC INSURANCE 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 ABSA BANK and CIC INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABSA BANK OF and CIC INSURANCE GROUP, you can compare the effects of market volatilities on ABSA BANK and CIC INSURANCE 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 ABSA BANK with a short position of CIC INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA BANK and CIC INSURANCE.
Diversification Opportunities for ABSA BANK and CIC INSURANCE
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABSA and CIC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ABSA BANK OF and CIC INSURANCE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIC INSURANCE GROUP and ABSA BANK 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 ABSA BANK OF are associated (or correlated) with CIC INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIC INSURANCE GROUP has no effect on the direction of ABSA BANK i.e., ABSA BANK and CIC INSURANCE go up and down completely randomly.
Pair Corralation between ABSA BANK and CIC INSURANCE
Assuming the 90 days trading horizon ABSA BANK is expected to generate 1.42 times less return on investment than CIC INSURANCE. But when comparing it to its historical volatility, ABSA BANK OF is 1.96 times less risky than CIC INSURANCE. It trades about 0.04 of its potential returns per unit of risk. CIC INSURANCE GROUP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 172.00 in CIC INSURANCE GROUP on August 28, 2024 and sell it today you would earn a total of 48.00 from holding CIC INSURANCE GROUP or generate 27.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABSA BANK OF vs. CIC INSURANCE GROUP
Performance |
| Timeline |
| ABSA BANK |
| CIC INSURANCE GROUP |
ABSA BANK and CIC INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABSA BANK and CIC INSURANCE
The main advantage of trading using opposite ABSA BANK and CIC INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA BANK position performs unexpectedly, CIC INSURANCE 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 CIC INSURANCE will offset losses from the drop in CIC INSURANCE's long position.The idea behind ABSA BANK OF and CIC INSURANCE GROUP 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |