Correlation Between MADISON FINANCIAL and CEC AFRICA
Can any of the company-specific risk be diversified away by investing in both MADISON FINANCIAL and CEC AFRICA 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 CEC AFRICA 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 CEC AFRICA INVESTMENTS, you can compare the effects of market volatilities on MADISON FINANCIAL and CEC AFRICA 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 CEC AFRICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MADISON FINANCIAL and CEC AFRICA.
Diversification Opportunities for MADISON FINANCIAL and CEC AFRICA
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MADISON and CEC is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding MADISON FINANCIAL SERVICES and CEC AFRICA INVESTMENTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEC AFRICA INVESTMENTS 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 CEC AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEC AFRICA INVESTMENTS has no effect on the direction of MADISON FINANCIAL i.e., MADISON FINANCIAL and CEC AFRICA go up and down completely randomly.
Pair Corralation between MADISON FINANCIAL and CEC AFRICA
Assuming the 90 days trading horizon MADISON FINANCIAL SERVICES is expected to generate 1.08 times more return on investment than CEC AFRICA. However, MADISON FINANCIAL is 1.08 times more volatile than CEC AFRICA INVESTMENTS. It trades about 0.21 of its potential returns per unit of risk. CEC AFRICA INVESTMENTS is currently generating about -0.21 per unit of risk. If you would invest 180.00 in MADISON FINANCIAL SERVICES on August 31, 2024 and sell it today you would earn a total of 3.00 from holding MADISON FINANCIAL SERVICES or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MADISON FINANCIAL SERVICES vs. CEC AFRICA INVESTMENTS
Performance |
| Timeline |
| MADISON FINANCIAL |
| CEC AFRICA INVESTMENTS |
MADISON FINANCIAL and CEC AFRICA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MADISON FINANCIAL and CEC AFRICA
The main advantage of trading using opposite MADISON FINANCIAL and CEC AFRICA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MADISON FINANCIAL position performs unexpectedly, CEC AFRICA 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 CEC AFRICA will offset losses from the drop in CEC AFRICA's long position.| MADISON FINANCIAL vs. STANDARD CHARTERED BANK | MADISON FINANCIAL vs. METAL FABRICATORS OF | MADISON FINANCIAL vs. AECI MINING EXPLOSIVES | MADISON FINANCIAL vs. ZAMBIA SUGAR PLC |
| CEC AFRICA vs. STANDARD CHARTERED BANK | CEC AFRICA vs. METAL FABRICATORS OF | CEC AFRICA vs. AECI MINING EXPLOSIVES | CEC AFRICA vs. ZAMBIA SUGAR PLC |
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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