Correlation Between HOME AFRIKA and SASINI

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Can any of the company-specific risk be diversified away by investing in both HOME AFRIKA and SASINI 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 SASINI 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 SASINI LTD, you can compare the effects of market volatilities on HOME AFRIKA and SASINI 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 SASINI. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOME AFRIKA and SASINI.

Diversification Opportunities for HOME AFRIKA and SASINI

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between HOME and SASINI is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding HOME AFRIKA LTD and SASINI LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SASINI LTD 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 SASINI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SASINI LTD has no effect on the direction of HOME AFRIKA i.e., HOME AFRIKA and SASINI go up and down completely randomly.

Pair Corralation between HOME AFRIKA and SASINI

Assuming the 90 days trading horizon HOME AFRIKA LTD is expected to generate 1.98 times more return on investment than SASINI. However, HOME AFRIKA is 1.98 times more volatile than SASINI LTD. It trades about 0.09 of its potential returns per unit of risk. SASINI LTD is currently generating about -0.2 per unit of risk. If you would invest  34.00  in HOME AFRIKA LTD on September 12, 2024 and sell it today you would earn a total of  2.00  from holding HOME AFRIKA LTD or generate 5.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

HOME AFRIKA LTD  vs.  SASINI LTD

 Performance 
       Timeline  
HOME AFRIKA LTD 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in HOME AFRIKA LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HOME AFRIKA sustained solid returns over the last few months and may actually be approaching a breakup point.
SASINI LTD 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SASINI LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HOME AFRIKA and SASINI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HOME AFRIKA and SASINI

The main advantage of trading using opposite HOME AFRIKA and SASINI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOME AFRIKA position performs unexpectedly, SASINI 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 SASINI will offset losses from the drop in SASINI's long position.
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The idea behind HOME AFRIKA LTD and SASINI LTD 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.
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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