Correlation Between Firstrand and Bowler Metcalf
Can any of the company-specific risk be diversified away by investing in both Firstrand and Bowler Metcalf 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 Bowler Metcalf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Firstrand and Bowler Metcalf, you can compare the effects of market volatilities on Firstrand and Bowler Metcalf 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 Bowler Metcalf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firstrand and Bowler Metcalf.
Diversification Opportunities for Firstrand and Bowler Metcalf
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Firstrand and Bowler is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Firstrand and Bowler Metcalf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowler Metcalf 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 Bowler Metcalf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowler Metcalf has no effect on the direction of Firstrand i.e., Firstrand and Bowler Metcalf go up and down completely randomly.
Pair Corralation between Firstrand and Bowler Metcalf
Assuming the 90 days trading horizon Firstrand is expected to generate 0.68 times more return on investment than Bowler Metcalf. However, Firstrand is 1.47 times less risky than Bowler Metcalf. It trades about 0.1 of its potential returns per unit of risk. Bowler Metcalf is currently generating about -0.06 per unit of risk. If you would invest 773,700 in Firstrand on August 31, 2024 and sell it today you would earn a total of 16,100 from holding Firstrand or generate 2.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Firstrand vs. Bowler Metcalf
Performance |
| Timeline |
| Firstrand |
| Bowler Metcalf |
Firstrand and Bowler Metcalf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Firstrand and Bowler Metcalf
The main advantage of trading using opposite Firstrand and Bowler Metcalf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firstrand position performs unexpectedly, Bowler Metcalf 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 Bowler Metcalf will offset losses from the drop in Bowler Metcalf's long position.| Firstrand vs. Capitec Bank Holdings | Firstrand vs. Reinet Investments SCA | Firstrand vs. Astral Foods | Firstrand vs. HomeChoice Investments |
| Bowler Metcalf vs. Trematon Capital Investments | Bowler Metcalf vs. African Media Entertainment | Bowler Metcalf vs. Astoria Investments | Bowler Metcalf vs. Hosken Consolidated Investments |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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