Correlation Between MADISON FINANCIAL and CHILANGA CEMENT
Can any of the company-specific risk be diversified away by investing in both MADISON FINANCIAL and CHILANGA CEMENT 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 CHILANGA CEMENT 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 CHILANGA CEMENT PLC, you can compare the effects of market volatilities on MADISON FINANCIAL and CHILANGA CEMENT 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 CHILANGA CEMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of MADISON FINANCIAL and CHILANGA CEMENT.
Diversification Opportunities for MADISON FINANCIAL and CHILANGA CEMENT
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MADISON and CHILANGA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding MADISON FINANCIAL SERVICES and CHILANGA CEMENT PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHILANGA CEMENT PLC 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 CHILANGA CEMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHILANGA CEMENT PLC has no effect on the direction of MADISON FINANCIAL i.e., MADISON FINANCIAL and CHILANGA CEMENT go up and down completely randomly.
Pair Corralation between MADISON FINANCIAL and CHILANGA CEMENT
Assuming the 90 days trading horizon MADISON FINANCIAL is expected to generate 2.19 times less return on investment than CHILANGA CEMENT. But when comparing it to its historical volatility, MADISON FINANCIAL SERVICES is 16.83 times less risky than CHILANGA CEMENT. It trades about 0.22 of its potential returns per unit of risk. CHILANGA CEMENT PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,549 in CHILANGA CEMENT PLC on August 27, 2024 and sell it today you would earn a total of 0.00 from holding CHILANGA CEMENT PLC or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MADISON FINANCIAL SERVICES vs. CHILANGA CEMENT PLC
Performance |
| Timeline |
| MADISON FINANCIAL |
| CHILANGA CEMENT PLC |
MADISON FINANCIAL and CHILANGA CEMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MADISON FINANCIAL and CHILANGA CEMENT
The main advantage of trading using opposite MADISON FINANCIAL and CHILANGA CEMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MADISON FINANCIAL position performs unexpectedly, CHILANGA CEMENT 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 CHILANGA CEMENT will offset losses from the drop in CHILANGA CEMENT's long position.| MADISON FINANCIAL vs. AIRTEL NETWORKS ZAMBIA | MADISON FINANCIAL vs. NATIONAL BREWERIES PLC | MADISON FINANCIAL vs. ZAMBIA REINSURANCE PLC |
| CHILANGA CEMENT vs. AIRTEL NETWORKS ZAMBIA | CHILANGA CEMENT vs. NATIONAL BREWERIES PLC | CHILANGA CEMENT vs. ZAMBIA REINSURANCE 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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