Correlation Between East Africa and Western Acquisition
Can any of the company-specific risk be diversified away by investing in both East Africa and Western Acquisition 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 Western Acquisition 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 Western Acquisition Ventures, you can compare the effects of market volatilities on East Africa and Western Acquisition 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 Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Western Acquisition.
Diversification Opportunities for East Africa and Western Acquisition
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between East and Western is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of East Africa i.e., East Africa and Western Acquisition go up and down completely randomly.
Pair Corralation between East Africa and Western Acquisition
Assuming the 90 days horizon East Africa Metals is expected to generate 16.96 times more return on investment than Western Acquisition. However, East Africa is 16.96 times more volatile than Western Acquisition Ventures. It trades about 0.07 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.01 per unit of risk. If you would invest 8.22 in East Africa Metals on September 12, 2024 and sell it today you would earn a total of 2.78 from holding East Africa Metals or generate 33.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 92.63% |
| Values | Daily Returns |
East Africa Metals vs. Western Acquisition Ventures
Performance |
| Timeline |
| East Africa Metals |
| Western Acquisition |
East Africa and Western Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Africa and Western Acquisition
The main advantage of trading using opposite East Africa and Western Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, Western Acquisition 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 Western Acquisition will offset losses from the drop in Western Acquisition's long position.| East Africa vs. Advantage Solutions | East Africa vs. Atlas Corp | East Africa vs. PureCycle Technologies | East Africa vs. WM Technology |
| Western Acquisition vs. Thai Beverage PCL | Western Acquisition vs. East Africa Metals | Western Acquisition vs. Royalty Management Holding | Western Acquisition vs. Mangazeya Mining |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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