Correlation Between FIRST MUTUAL and ECONET WIRELESS
Can any of the company-specific risk be diversified away by investing in both FIRST MUTUAL and ECONET WIRELESS 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 ECONET WIRELESS 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 ECONET WIRELESS HOLDINGS, you can compare the effects of market volatilities on FIRST MUTUAL and ECONET WIRELESS 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 ECONET WIRELESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST MUTUAL and ECONET WIRELESS.
Diversification Opportunities for FIRST MUTUAL and ECONET WIRELESS
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between FIRST and ECONET is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding FIRST MUTUAL PROPERTIES and ECONET WIRELESS HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECONET WIRELESS HOLDINGS 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 ECONET WIRELESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECONET WIRELESS HOLDINGS has no effect on the direction of FIRST MUTUAL i.e., FIRST MUTUAL and ECONET WIRELESS go up and down completely randomly.
Pair Corralation between FIRST MUTUAL and ECONET WIRELESS
Assuming the 90 days trading horizon FIRST MUTUAL PROPERTIES is expected to generate 0.96 times more return on investment than ECONET WIRELESS. However, FIRST MUTUAL PROPERTIES is 1.04 times less risky than ECONET WIRELESS. It trades about 0.27 of its potential returns per unit of risk. ECONET WIRELESS HOLDINGS is currently generating about -0.09 per unit of risk. If you would invest 7,500 in FIRST MUTUAL PROPERTIES on September 14, 2024 and sell it today you would earn a total of 2,754 from holding FIRST MUTUAL PROPERTIES or generate 36.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FIRST MUTUAL PROPERTIES vs. ECONET WIRELESS HOLDINGS
Performance |
| Timeline |
| FIRST MUTUAL PROPERTIES |
| ECONET WIRELESS HOLDINGS |
FIRST MUTUAL and ECONET WIRELESS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FIRST MUTUAL and ECONET WIRELESS
The main advantage of trading using opposite FIRST MUTUAL and ECONET WIRELESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST MUTUAL position performs unexpectedly, ECONET WIRELESS 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 ECONET WIRELESS will offset losses from the drop in ECONET WIRELESS's long position.| FIRST MUTUAL vs. BRITISH AMERICAN TOBACCO | FIRST MUTUAL vs. TANGANDA TEA PANY | FIRST MUTUAL vs. ZB FINANCIAL HOLDINGS | FIRST MUTUAL vs. Cass Saddle Agriculture |
| ECONET WIRELESS vs. STAR AFRICA PORATION | ECONET WIRELESS vs. CAFCA LIMITED | ECONET WIRELESS vs. FIRST MUTUAL PROPERTIES | ECONET WIRELESS vs. AFRICAN DISTILLERS LIMITED |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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