Correlation Between CRDB BANK and EAST AFRICAN
Can any of the company-specific risk be diversified away by investing in both CRDB BANK and EAST AFRICAN 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 CRDB BANK and EAST AFRICAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CRDB BANK LTD and EAST AFRICAN BREWERIES, you can compare the effects of market volatilities on CRDB BANK and EAST AFRICAN 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 CRDB BANK with a short position of EAST AFRICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of CRDB BANK and EAST AFRICAN.
Diversification Opportunities for CRDB BANK and EAST AFRICAN
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CRDB and EAST is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CRDB BANK LTD and EAST AFRICAN BREWERIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAST AFRICAN BREWERIES and CRDB 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 CRDB BANK LTD are associated (or correlated) with EAST AFRICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAST AFRICAN BREWERIES has no effect on the direction of CRDB BANK i.e., CRDB BANK and EAST AFRICAN go up and down completely randomly.
Pair Corralation between CRDB BANK and EAST AFRICAN
Assuming the 90 days trading horizon CRDB BANK is expected to generate 2.19 times less return on investment than EAST AFRICAN. But when comparing it to its historical volatility, CRDB BANK LTD is 3.72 times less risky than EAST AFRICAN. It trades about 0.12 of its potential returns per unit of risk. EAST AFRICAN BREWERIES is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 182,000 in EAST AFRICAN BREWERIES on September 5, 2024 and sell it today you would earn a total of 151,000 from holding EAST AFRICAN BREWERIES or generate 82.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CRDB BANK LTD vs. EAST AFRICAN BREWERIES
Performance |
| Timeline |
| CRDB BANK LTD |
| EAST AFRICAN BREWERIES |
CRDB BANK and EAST AFRICAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CRDB BANK and EAST AFRICAN
The main advantage of trading using opposite CRDB BANK and EAST AFRICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRDB BANK position performs unexpectedly, EAST AFRICAN 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 EAST AFRICAN will offset losses from the drop in EAST AFRICAN's long position.| CRDB BANK vs. YETU MICROFINANCE PLC | CRDB BANK vs. NATION MEDIA GROUP | CRDB BANK vs. AFRIPRISE INVESTMENT PLC | CRDB BANK vs. PRECISION AIR SERVICES |
| EAST AFRICAN vs. YETU MICROFINANCE PLC | EAST AFRICAN vs. CRDB BANK LTD | EAST AFRICAN vs. NATION MEDIA GROUP | EAST AFRICAN vs. AFRIPRISE INVESTMENT 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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