Correlation Between FIRST MUTUAL and AFRICAN DISTILLERS
Can any of the company-specific risk be diversified away by investing in both FIRST MUTUAL and AFRICAN DISTILLERS 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 FIRST MUTUAL and AFRICAN DISTILLERS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIRST MUTUAL PROPERTIES and AFRICAN DISTILLERS LIMITED, you can compare the effects of market volatilities on FIRST MUTUAL and AFRICAN DISTILLERS 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 FIRST MUTUAL with a short position of AFRICAN DISTILLERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST MUTUAL and AFRICAN DISTILLERS.
Diversification Opportunities for FIRST MUTUAL and AFRICAN DISTILLERS
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FIRST and AFRICAN is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding FIRST MUTUAL PROPERTIES and AFRICAN DISTILLERS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFRICAN DISTILLERS and FIRST MUTUAL 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 FIRST MUTUAL PROPERTIES are associated (or correlated) with AFRICAN DISTILLERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFRICAN DISTILLERS has no effect on the direction of FIRST MUTUAL i.e., FIRST MUTUAL and AFRICAN DISTILLERS go up and down completely randomly.
Pair Corralation between FIRST MUTUAL and AFRICAN DISTILLERS
Assuming the 90 days trading horizon FIRST MUTUAL PROPERTIES is expected to generate 1.66 times more return on investment than AFRICAN DISTILLERS. However, FIRST MUTUAL is 1.66 times more volatile than AFRICAN DISTILLERS LIMITED. It trades about 0.3 of its potential returns per unit of risk. AFRICAN DISTILLERS LIMITED is currently generating about 0.01 per unit of risk. If you would invest 3,400 in FIRST MUTUAL PROPERTIES on August 30, 2024 and sell it today you would earn a total of 6,100 from holding FIRST MUTUAL PROPERTIES or generate 179.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FIRST MUTUAL PROPERTIES vs. AFRICAN DISTILLERS LIMITED
Performance |
| Timeline |
| FIRST MUTUAL PROPERTIES |
| AFRICAN DISTILLERS |
FIRST MUTUAL and AFRICAN DISTILLERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FIRST MUTUAL and AFRICAN DISTILLERS
The main advantage of trading using opposite FIRST MUTUAL and AFRICAN DISTILLERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST MUTUAL position performs unexpectedly, AFRICAN DISTILLERS 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 AFRICAN DISTILLERS will offset losses from the drop in AFRICAN DISTILLERS's long position.| FIRST MUTUAL vs. FIRST MUTUAL HOLDINGS | FIRST MUTUAL vs. STAR AFRICA PORATION | FIRST MUTUAL vs. CAFCA LIMITED | FIRST MUTUAL vs. AFRICAN DISTILLERS LIMITED |
| AFRICAN DISTILLERS vs. STAR AFRICA PORATION | AFRICAN DISTILLERS vs. CAFCA LIMITED | AFRICAN DISTILLERS vs. FIRST MUTUAL PROPERTIES | AFRICAN DISTILLERS vs. TANGANDA TEA PANY |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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