Correlation Between KENYA MERCIAL and NATIONAL MICROFINANCE
Can any of the company-specific risk be diversified away by investing in both KENYA MERCIAL and NATIONAL MICROFINANCE 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 KENYA MERCIAL and NATIONAL MICROFINANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KENYA MERCIAL BANK and NATIONAL MICROFINANCE BANK, you can compare the effects of market volatilities on KENYA MERCIAL and NATIONAL MICROFINANCE 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 KENYA MERCIAL with a short position of NATIONAL MICROFINANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENYA MERCIAL and NATIONAL MICROFINANCE.
Diversification Opportunities for KENYA MERCIAL and NATIONAL MICROFINANCE
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between KENYA and NATIONAL is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding KENYA MERCIAL BANK and NATIONAL MICROFINANCE BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL MICROFINANCE and KENYA MERCIAL 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 KENYA MERCIAL BANK are associated (or correlated) with NATIONAL MICROFINANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL MICROFINANCE has no effect on the direction of KENYA MERCIAL i.e., KENYA MERCIAL and NATIONAL MICROFINANCE go up and down completely randomly.
Pair Corralation between KENYA MERCIAL and NATIONAL MICROFINANCE
Assuming the 90 days trading horizon KENYA MERCIAL BANK is expected to under-perform the NATIONAL MICROFINANCE. In addition to that, KENYA MERCIAL is 10.9 times more volatile than NATIONAL MICROFINANCE BANK. It trades about -0.1 of its total potential returns per unit of risk. NATIONAL MICROFINANCE BANK is currently generating about -0.21 per unit of volatility. If you would invest 540,000 in NATIONAL MICROFINANCE BANK on August 31, 2024 and sell it today you would lose (5,000) from holding NATIONAL MICROFINANCE BANK or give up 0.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KENYA MERCIAL BANK vs. NATIONAL MICROFINANCE BANK
Performance |
| Timeline |
| KENYA MERCIAL BANK |
| NATIONAL MICROFINANCE |
KENYA MERCIAL and NATIONAL MICROFINANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KENYA MERCIAL and NATIONAL MICROFINANCE
The main advantage of trading using opposite KENYA MERCIAL and NATIONAL MICROFINANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENYA MERCIAL position performs unexpectedly, NATIONAL MICROFINANCE 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 NATIONAL MICROFINANCE will offset losses from the drop in NATIONAL MICROFINANCE's long position.| KENYA MERCIAL vs. YETU MICROFINANCE PLC | KENYA MERCIAL vs. AFRIPRISE INVESTMENT PLC | KENYA MERCIAL vs. PRECISION AIR SERVICES | KENYA MERCIAL vs. MKOMBOZI MERCIAL BANK |
| NATIONAL MICROFINANCE vs. YETU MICROFINANCE PLC | NATIONAL MICROFINANCE vs. AFRIPRISE INVESTMENT PLC | NATIONAL MICROFINANCE vs. PRECISION AIR SERVICES | NATIONAL MICROFINANCE vs. MKOMBOZI MERCIAL BANK |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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