Correlation Between HOME AFRIKA and ABSA BANK
Can any of the company-specific risk be diversified away by investing in both HOME AFRIKA and ABSA BANK 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 HOME AFRIKA and ABSA BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HOME AFRIKA LTD and ABSA BANK OF, you can compare the effects of market volatilities on HOME AFRIKA and ABSA BANK 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 HOME AFRIKA with a short position of ABSA BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME AFRIKA and ABSA BANK.
Diversification Opportunities for HOME AFRIKA and ABSA BANK
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HOME and ABSA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding HOME AFRIKA LTD and ABSA BANK OF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA BANK and HOME AFRIKA 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 HOME AFRIKA LTD are associated (or correlated) with ABSA BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA BANK has no effect on the direction of HOME AFRIKA i.e., HOME AFRIKA and ABSA BANK go up and down completely randomly.
Pair Corralation between HOME AFRIKA and ABSA BANK
Assuming the 90 days trading horizon HOME AFRIKA LTD is expected to generate 5.08 times more return on investment than ABSA BANK. However, HOME AFRIKA is 5.08 times more volatile than ABSA BANK OF. It trades about 0.06 of its potential returns per unit of risk. ABSA BANK OF is currently generating about 0.11 per unit of risk. If you would invest 31.00 in HOME AFRIKA LTD on August 28, 2024 and sell it today you would earn a total of 3.00 from holding HOME AFRIKA LTD or generate 9.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HOME AFRIKA LTD vs. ABSA BANK OF
Performance |
| Timeline |
| HOME AFRIKA LTD |
| ABSA BANK |
HOME AFRIKA and ABSA BANK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HOME AFRIKA and ABSA BANK
The main advantage of trading using opposite HOME AFRIKA and ABSA BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME AFRIKA position performs unexpectedly, ABSA BANK 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 ABSA BANK will offset losses from the drop in ABSA BANK's long position.The idea behind HOME AFRIKA LTD and ABSA BANK OF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |