Correlation Between CAFCA and MASHONALAND HOLDINGS

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

Diversification Opportunities for CAFCA and MASHONALAND HOLDINGS

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between CAFCA and MASHONALAND is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CAFCA LIMITED and MASHONALAND HOLDINGS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASHONALAND HOLDINGS and CAFCA 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 CAFCA LIMITED are associated (or correlated) with MASHONALAND HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASHONALAND HOLDINGS has no effect on the direction of CAFCA i.e., CAFCA and MASHONALAND HOLDINGS go up and down completely randomly.

Pair Corralation between CAFCA and MASHONALAND HOLDINGS

Assuming the 90 days trading horizon CAFCA LIMITED is expected to generate 2.02 times more return on investment than MASHONALAND HOLDINGS. However, CAFCA is 2.02 times more volatile than MASHONALAND HOLDINGS LIMITED. It trades about -0.21 of its potential returns per unit of risk. MASHONALAND HOLDINGS LIMITED is currently generating about -0.45 per unit of risk. If you would invest  204,000  in CAFCA LIMITED on November 29, 2024 and sell it today you would lose (24,000) from holding CAFCA LIMITED or give up 11.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

CAFCA LIMITED  vs.  MASHONALAND HOLDINGS LIMITED

 Performance 
       Timeline  
CAFCA LIMITED 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days CAFCA LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
MASHONALAND HOLDINGS 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days MASHONALAND HOLDINGS LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CAFCA and MASHONALAND HOLDINGS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CAFCA and MASHONALAND HOLDINGS

The main advantage of trading using opposite CAFCA and MASHONALAND HOLDINGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAFCA position performs unexpectedly, MASHONALAND HOLDINGS 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 MASHONALAND HOLDINGS will offset losses from the drop in MASHONALAND HOLDINGS's long position.
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The idea behind CAFCA LIMITED and MASHONALAND HOLDINGS LIMITED 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.
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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