Correlation Between EAST AFRICAN and NATION MEDIA
Can any of the company-specific risk be diversified away by investing in both EAST AFRICAN and NATION MEDIA 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 EAST AFRICAN and NATION MEDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAST AFRICAN BREWERIES and NATION MEDIA GROUP, you can compare the effects of market volatilities on EAST AFRICAN and NATION MEDIA 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 EAST AFRICAN with a short position of NATION MEDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAST AFRICAN and NATION MEDIA.
Diversification Opportunities for EAST AFRICAN and NATION MEDIA
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EAST and NATION is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding EAST AFRICAN BREWERIES and NATION MEDIA GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATION MEDIA GROUP and EAST AFRICAN 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 EAST AFRICAN BREWERIES are associated (or correlated) with NATION MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATION MEDIA GROUP has no effect on the direction of EAST AFRICAN i.e., EAST AFRICAN and NATION MEDIA go up and down completely randomly.
Pair Corralation between EAST AFRICAN and NATION MEDIA
Assuming the 90 days trading horizon EAST AFRICAN BREWERIES is expected to generate 0.97 times more return on investment than NATION MEDIA. However, EAST AFRICAN BREWERIES is 1.03 times less risky than NATION MEDIA. It trades about 0.15 of its potential returns per unit of risk. NATION MEDIA GROUP is currently generating about 0.01 per unit of risk. If you would invest 325,000 in EAST AFRICAN BREWERIES on November 4, 2024 and sell it today you would earn a total of 31,000 from holding EAST AFRICAN BREWERIES or generate 9.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
EAST AFRICAN BREWERIES vs. NATION MEDIA GROUP
Performance |
| Timeline |
| EAST AFRICAN BREWERIES |
| NATION MEDIA GROUP |
EAST AFRICAN and NATION MEDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EAST AFRICAN and NATION MEDIA
The main advantage of trading using opposite EAST AFRICAN and NATION MEDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAST AFRICAN position performs unexpectedly, NATION MEDIA 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 NATION MEDIA will offset losses from the drop in NATION MEDIA's long position.| EAST AFRICAN vs. YETU MICROFINANCE PLC | EAST AFRICAN vs. CRDB BANK LTD | EAST AFRICAN vs. NATION MEDIA GROUP | EAST AFRICAN vs. MWALIMU MERCIAL BANK |
| NATION MEDIA vs. YETU MICROFINANCE PLC | NATION MEDIA vs. CRDB BANK LTD | NATION MEDIA vs. MWALIMU MERCIAL BANK | NATION MEDIA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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