Correlation Between East Africa and BRASKM

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Can any of the company-specific risk be diversified away by investing in both East Africa and BRASKM 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 Africa and BRASKM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and BRASKM 5875 31 JAN 50, you can compare the effects of market volatilities on East Africa and BRASKM 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 Africa with a short position of BRASKM. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and BRASKM.

Diversification Opportunities for East Africa and BRASKM

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between East and BRASKM is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and BRASKM 5875 31 JAN 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRASKM 5875 31 and East 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 East Africa Metals are associated (or correlated) with BRASKM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRASKM 5875 31 has no effect on the direction of East Africa i.e., East Africa and BRASKM go up and down completely randomly.

Pair Corralation between East Africa and BRASKM

Assuming the 90 days horizon East Africa Metals is expected to generate 13.54 times more return on investment than BRASKM. However, East Africa is 13.54 times more volatile than BRASKM 5875 31 JAN 50. It trades about 0.08 of its potential returns per unit of risk. BRASKM 5875 31 JAN 50 is currently generating about 0.01 per unit of risk. If you would invest  9.34  in East Africa Metals on August 31, 2024 and sell it today you would earn a total of  1.66  from holding East Africa Metals or generate 17.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy40.1%
ValuesDaily Returns

East Africa Metals  vs.  BRASKM 5875 31 JAN 50

 Performance 
       Timeline  
East Africa Metals 

Risk-Adjusted Performance

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Weak
 
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Very Weak
Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
BRASKM 5875 31 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Good
Over the last 90 days BRASKM 5875 31 JAN 50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BRASKM is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

East Africa and BRASKM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with East Africa and BRASKM

The main advantage of trading using opposite East Africa and BRASKM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, BRASKM 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 BRASKM will offset losses from the drop in BRASKM's long position.
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The idea behind East Africa Metals and BRASKM 5875 31 JAN 50 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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