Correlation Between Firstrand and Vodacom
Can any of the company-specific risk be diversified away by investing in both Firstrand and Vodacom 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 Vodacom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Firstrand and Vodacom Group, you can compare the effects of market volatilities on Firstrand and Vodacom 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 Vodacom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firstrand and Vodacom.
Diversification Opportunities for Firstrand and Vodacom
Poor diversification
The 3 months correlation between Firstrand and Vodacom is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Firstrand and Vodacom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodacom Group 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 Vodacom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodacom Group has no effect on the direction of Firstrand i.e., Firstrand and Vodacom go up and down completely randomly.
Pair Corralation between Firstrand and Vodacom
Assuming the 90 days trading horizon Firstrand is expected to generate 0.82 times more return on investment than Vodacom. However, Firstrand is 1.22 times less risky than Vodacom. It trades about -0.09 of its potential returns per unit of risk. Vodacom Group is currently generating about -0.28 per unit of risk. If you would invest 796,600 in Firstrand on August 28, 2024 and sell it today you would lose (20,100) from holding Firstrand or give up 2.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Firstrand vs. Vodacom Group
Performance |
| Timeline |
| Firstrand |
| Vodacom Group |
Firstrand and Vodacom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Firstrand and Vodacom
The main advantage of trading using opposite Firstrand and Vodacom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firstrand position performs unexpectedly, Vodacom 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 Vodacom will offset losses from the drop in Vodacom's long position.| Firstrand vs. Centaur Bci Balanced | Firstrand vs. Sabvest Capital | Firstrand vs. Growthpoint Properties | Firstrand vs. Bowler Metcalf |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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