Correlation Between Nedbank and Brimstone Investment
Can any of the company-specific risk be diversified away by investing in both Nedbank and Brimstone Investment 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 Nedbank and Brimstone Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nedbank Group and Brimstone Investment, you can compare the effects of market volatilities on Nedbank and Brimstone Investment 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 Nedbank with a short position of Brimstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nedbank and Brimstone Investment.
Diversification Opportunities for Nedbank and Brimstone Investment
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nedbank and Brimstone is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nedbank Group and Brimstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brimstone Investment and Nedbank 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 Nedbank Group are associated (or correlated) with Brimstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brimstone Investment has no effect on the direction of Nedbank i.e., Nedbank and Brimstone Investment go up and down completely randomly.
Pair Corralation between Nedbank and Brimstone Investment
Assuming the 90 days trading horizon Nedbank Group is expected to generate 0.39 times more return on investment than Brimstone Investment. However, Nedbank Group is 2.55 times less risky than Brimstone Investment. It trades about 0.05 of its potential returns per unit of risk. Brimstone Investment is currently generating about 0.01 per unit of risk. If you would invest 2,026,722 in Nedbank Group on October 24, 2024 and sell it today you would earn a total of 813,678 from holding Nedbank Group or generate 40.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nedbank Group vs. Brimstone Investment
Performance |
| Timeline |
| Nedbank Group |
| Brimstone Investment |
Nedbank and Brimstone Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nedbank and Brimstone Investment
The main advantage of trading using opposite Nedbank and Brimstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nedbank position performs unexpectedly, Brimstone Investment 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 Brimstone Investment will offset losses from the drop in Brimstone Investment's long position.| Nedbank vs. British American Tobacco | Nedbank vs. Reinet Investments SCA | Nedbank vs. eMedia Holdings Limited | Nedbank vs. Astral Foods |
| Brimstone Investment vs. Nedbank Group | Brimstone Investment vs. Safari Investments RSA | Brimstone Investment vs. Astoria Investments | Brimstone Investment vs. Harmony Gold Mining |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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