Correlation Between MUA and AFRICAN DOMESTIC
Can any of the company-specific risk be diversified away by investing in both MUA and AFRICAN DOMESTIC 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 MUA and AFRICAN DOMESTIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MUA LTD and AFRICAN DOMESTIC BOND, you can compare the effects of market volatilities on MUA and AFRICAN DOMESTIC 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 MUA with a short position of AFRICAN DOMESTIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of MUA and AFRICAN DOMESTIC.
Diversification Opportunities for MUA and AFRICAN DOMESTIC
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between MUA and AFRICAN is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding MUA LTD and AFRICAN DOMESTIC BOND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFRICAN DOMESTIC BOND and MUA 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 MUA LTD are associated (or correlated) with AFRICAN DOMESTIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFRICAN DOMESTIC BOND has no effect on the direction of MUA i.e., MUA and AFRICAN DOMESTIC go up and down completely randomly.
Pair Corralation between MUA and AFRICAN DOMESTIC
Assuming the 90 days trading horizon MUA LTD is expected to under-perform the AFRICAN DOMESTIC. But the stock apears to be less risky and, when comparing its historical volatility, MUA LTD is 4.75 times less risky than AFRICAN DOMESTIC. The stock trades about -0.28 of its potential returns per unit of risk. The AFRICAN DOMESTIC BOND is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 619.00 in AFRICAN DOMESTIC BOND on October 25, 2024 and sell it today you would earn a total of 15.00 from holding AFRICAN DOMESTIC BOND or generate 2.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MUA LTD vs. AFRICAN DOMESTIC BOND
Performance |
| Timeline |
| MUA LTD |
| AFRICAN DOMESTIC BOND |
MUA and AFRICAN DOMESTIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MUA and AFRICAN DOMESTIC
The main advantage of trading using opposite MUA and AFRICAN DOMESTIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MUA position performs unexpectedly, AFRICAN DOMESTIC 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 AFRICAN DOMESTIC will offset losses from the drop in AFRICAN DOMESTIC's long position.| MUA vs. PHOENIX BEVERAGES LTD | MUA vs. LOTTOTECH LTD | MUA vs. FINCORP INVESTMENT LTD | MUA vs. NATIONAL INVESTMENT TRUST |
| AFRICAN DOMESTIC vs. FINCORP INVESTMENT LTD | AFRICAN DOMESTIC vs. CONSTANCE HOTELS SERVICES | AFRICAN DOMESTIC vs. ABC BANKING PORATION | AFRICAN DOMESTIC vs. PHOENIX BEVERAGES LTD |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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