Correlation Between MADISON FINANCIAL and ZAMBIA BATA
Can any of the company-specific risk be diversified away by investing in both MADISON FINANCIAL and ZAMBIA BATA 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 MADISON FINANCIAL and ZAMBIA BATA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MADISON FINANCIAL SERVICES and ZAMBIA BATA SHOE, you can compare the effects of market volatilities on MADISON FINANCIAL and ZAMBIA BATA 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 MADISON FINANCIAL with a short position of ZAMBIA BATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MADISON FINANCIAL and ZAMBIA BATA.
Diversification Opportunities for MADISON FINANCIAL and ZAMBIA BATA
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MADISON and ZAMBIA is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding MADISON FINANCIAL SERVICES and ZAMBIA BATA SHOE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZAMBIA BATA SHOE and MADISON FINANCIAL 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 MADISON FINANCIAL SERVICES are associated (or correlated) with ZAMBIA BATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZAMBIA BATA SHOE has no effect on the direction of MADISON FINANCIAL i.e., MADISON FINANCIAL and ZAMBIA BATA go up and down completely randomly.
Pair Corralation between MADISON FINANCIAL and ZAMBIA BATA
Assuming the 90 days trading horizon MADISON FINANCIAL SERVICES is expected to under-perform the ZAMBIA BATA. But the stock apears to be less risky and, when comparing its historical volatility, MADISON FINANCIAL SERVICES is 1.88 times less risky than ZAMBIA BATA. The stock trades about -0.05 of its potential returns per unit of risk. The ZAMBIA BATA SHOE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 256.00 in ZAMBIA BATA SHOE on September 2, 2024 and sell it today you would earn a total of 344.00 from holding ZAMBIA BATA SHOE or generate 134.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MADISON FINANCIAL SERVICES vs. ZAMBIA BATA SHOE
Performance |
| Timeline |
| MADISON FINANCIAL |
| ZAMBIA BATA SHOE |
MADISON FINANCIAL and ZAMBIA BATA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MADISON FINANCIAL and ZAMBIA BATA
The main advantage of trading using opposite MADISON FINANCIAL and ZAMBIA BATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MADISON FINANCIAL position performs unexpectedly, ZAMBIA BATA 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 ZAMBIA BATA will offset losses from the drop in ZAMBIA BATA's long position.| MADISON FINANCIAL vs. AECI MINING EXPLOSIVES | MADISON FINANCIAL vs. BRITISH AMERICAN TOBACCO ZAMBIA | MADISON FINANCIAL vs. AIRTEL NETWORKS ZAMBIA | MADISON FINANCIAL vs. NATIONAL BREWERIES PLC |
| ZAMBIA BATA vs. STANDARD CHARTERED BANK | ZAMBIA BATA vs. NATIONAL BREWERIES PLC | ZAMBIA BATA vs. AECI MINING EXPLOSIVES | ZAMBIA BATA vs. CEC AFRICA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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