Correlation Between CEC AFRICA and CHILANGA CEMENT
Can any of the company-specific risk be diversified away by investing in both CEC AFRICA and CHILANGA CEMENT 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 CEC AFRICA and CHILANGA CEMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEC AFRICA INVESTMENTS and CHILANGA CEMENT PLC, you can compare the effects of market volatilities on CEC AFRICA and CHILANGA CEMENT 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 CEC AFRICA with a short position of CHILANGA CEMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEC AFRICA and CHILANGA CEMENT.
Diversification Opportunities for CEC AFRICA and CHILANGA CEMENT
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CEC and CHILANGA is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CEC AFRICA INVESTMENTS and CHILANGA CEMENT PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHILANGA CEMENT PLC and CEC AFRICA 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 CEC AFRICA INVESTMENTS are associated (or correlated) with CHILANGA CEMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHILANGA CEMENT PLC has no effect on the direction of CEC AFRICA i.e., CEC AFRICA and CHILANGA CEMENT go up and down completely randomly.
Pair Corralation between CEC AFRICA and CHILANGA CEMENT
Assuming the 90 days trading horizon CEC AFRICA is expected to generate 2.23 times less return on investment than CHILANGA CEMENT. But when comparing it to its historical volatility, CEC AFRICA INVESTMENTS is 7.8 times less risky than CHILANGA CEMENT. It trades about 0.1 of its potential returns per unit of risk. CHILANGA CEMENT PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,549 in CHILANGA CEMENT PLC on August 27, 2024 and sell it today you would earn a total of 0.00 from holding CHILANGA CEMENT PLC or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CEC AFRICA INVESTMENTS vs. CHILANGA CEMENT PLC
Performance |
| Timeline |
| CEC AFRICA INVESTMENTS |
| CHILANGA CEMENT PLC |
CEC AFRICA and CHILANGA CEMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEC AFRICA and CHILANGA CEMENT
The main advantage of trading using opposite CEC AFRICA and CHILANGA CEMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEC AFRICA position performs unexpectedly, CHILANGA CEMENT 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 CHILANGA CEMENT will offset losses from the drop in CHILANGA CEMENT's long position.| CEC AFRICA vs. AIRTEL NETWORKS ZAMBIA | CEC AFRICA vs. NATIONAL BREWERIES PLC | CEC AFRICA vs. ZAMBIA REINSURANCE PLC |
| CHILANGA CEMENT vs. AIRTEL NETWORKS ZAMBIA | CHILANGA CEMENT vs. NATIONAL BREWERIES PLC | CHILANGA CEMENT vs. ZAMBIA REINSURANCE 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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