Correlation Between ABSA NEW and SASINI

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Can any of the company-specific risk be diversified away by investing in both ABSA NEW and SASINI 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 ABSA NEW and SASINI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABSA NEW GOLD and SASINI LTD, you can compare the effects of market volatilities on ABSA NEW and SASINI 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 ABSA NEW with a short position of SASINI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA NEW and SASINI.

Diversification Opportunities for ABSA NEW and SASINI

-0.85
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between ABSA and SASINI is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding ABSA NEW GOLD and SASINI LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SASINI LTD and ABSA NEW 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 ABSA NEW GOLD are associated (or correlated) with SASINI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SASINI LTD has no effect on the direction of ABSA NEW i.e., ABSA NEW and SASINI go up and down completely randomly.

Pair Corralation between ABSA NEW and SASINI

Assuming the 90 days trading horizon ABSA NEW GOLD is expected to generate 0.39 times more return on investment than SASINI. However, ABSA NEW GOLD is 2.58 times less risky than SASINI. It trades about 0.17 of its potential returns per unit of risk. SASINI LTD is currently generating about -0.08 per unit of risk. If you would invest  294,000  in ABSA NEW GOLD on September 4, 2024 and sell it today you would earn a total of  28,000  from holding ABSA NEW GOLD or generate 9.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy98.39%
ValuesDaily Returns

ABSA NEW GOLD  vs.  SASINI LTD

 Performance 
       Timeline  
ABSA NEW GOLD 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ABSA NEW GOLD are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ABSA NEW may actually be approaching a critical reversion point that can send shares even higher in January 2025.
SASINI LTD 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SASINI LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ABSA NEW and SASINI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ABSA NEW and SASINI

The main advantage of trading using opposite ABSA NEW and SASINI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA NEW position performs unexpectedly, SASINI 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 SASINI will offset losses from the drop in SASINI's long position.
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The idea behind ABSA NEW GOLD and SASINI LTD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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