Correlation Between Firstrand and AECI
Can any of the company-specific risk be diversified away by investing in both Firstrand and AECI 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 Firstrand and AECI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Firstrand and AECI, you can compare the effects of market volatilities on Firstrand and AECI 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 Firstrand with a short position of AECI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firstrand and AECI.
Diversification Opportunities for Firstrand and AECI
Poor diversification
The 3 months correlation between Firstrand and AECI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Firstrand and AECI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECI and Firstrand 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 Firstrand are associated (or correlated) with AECI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECI has no effect on the direction of Firstrand i.e., Firstrand and AECI go up and down completely randomly.
Pair Corralation between Firstrand and AECI
Assuming the 90 days trading horizon Firstrand is expected to under-perform the AECI. In addition to that, Firstrand is 1.48 times more volatile than AECI. It trades about -0.11 of its total potential returns per unit of risk. AECI is currently generating about -0.09 per unit of volatility. If you would invest 960,600 in AECI on August 24, 2024 and sell it today you would lose (20,200) from holding AECI or give up 2.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Firstrand vs. AECI
Performance |
| Timeline |
| Firstrand |
| AECI |
Firstrand and AECI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Firstrand and AECI
The main advantage of trading using opposite Firstrand and AECI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firstrand position performs unexpectedly, AECI 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 AECI will offset losses from the drop in AECI's long position.| Firstrand vs. Centaur Bci Balanced | Firstrand vs. Sabvest Capital | Firstrand vs. Growthpoint Properties | Firstrand vs. Bowler Metcalf |
| AECI vs. Harmony Gold Mining | AECI vs. Capitec Bank Holdings | AECI vs. Kumba Iron Ore | AECI vs. E Media Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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