Correlation Between BANK OF BARODA and UMEME
Can any of the company-specific risk be diversified away by investing in both BANK OF BARODA and UMEME 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 BANK OF BARODA and UMEME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BANK OF BARODA and UMEME LIMITED, you can compare the effects of market volatilities on BANK OF BARODA and UMEME 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 BANK OF BARODA with a short position of UMEME. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OF BARODA and UMEME.
Diversification Opportunities for BANK OF BARODA and UMEME
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BANK and UMEME is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding BANK OF BARODA and UMEME LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMEME LIMITED and BANK OF BARODA 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 BANK OF BARODA are associated (or correlated) with UMEME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMEME LIMITED has no effect on the direction of BANK OF BARODA i.e., BANK OF BARODA and UMEME go up and down completely randomly.
Pair Corralation between BANK OF BARODA and UMEME
Assuming the 90 days trading horizon BANK OF BARODA is expected to generate 1.09 times more return on investment than UMEME. However, BANK OF BARODA is 1.09 times more volatile than UMEME LIMITED. It trades about 0.16 of its potential returns per unit of risk. UMEME LIMITED is currently generating about 0.03 per unit of risk. If you would invest 1,500 in BANK OF BARODA on August 27, 2024 and sell it today you would earn a total of 750.00 from holding BANK OF BARODA or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BANK OF BARODA vs. UMEME LIMITED
Performance |
| Timeline |
| BANK OF BARODA |
| UMEME LIMITED |
BANK OF BARODA and UMEME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BANK OF BARODA and UMEME
The main advantage of trading using opposite BANK OF BARODA and UMEME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK OF BARODA position performs unexpectedly, UMEME 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 UMEME will offset losses from the drop in UMEME's long position.| BANK OF BARODA vs. UMEME LIMITED | BANK OF BARODA vs. EAST AFRICAN BREWERIES | BANK OF BARODA vs. AIRTEL UGANDA LIMITED | BANK OF BARODA vs. QUALITY CHEMICAL INDUSTRIES |
| UMEME vs. BANK OF BARODA | UMEME vs. CENTUM INVESTMENT PANY | UMEME vs. EAST AFRICAN BREWERIES | UMEME vs. STANBIC BANK 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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