Correlation Between NATIONAL MICROFINANCE and TANZANIA PORTLAND
Can any of the company-specific risk be diversified away by investing in both NATIONAL MICROFINANCE and TANZANIA PORTLAND 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 NATIONAL MICROFINANCE and TANZANIA PORTLAND into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NATIONAL MICROFINANCE BANK and TANZANIA PORTLAND CEMENT, you can compare the effects of market volatilities on NATIONAL MICROFINANCE and TANZANIA PORTLAND 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 NATIONAL MICROFINANCE with a short position of TANZANIA PORTLAND. Check out your portfolio center. Please also check ongoing floating volatility patterns of NATIONAL MICROFINANCE and TANZANIA PORTLAND.
Diversification Opportunities for NATIONAL MICROFINANCE and TANZANIA PORTLAND
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NATIONAL and TANZANIA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NATIONAL MICROFINANCE BANK and TANZANIA PORTLAND CEMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TANZANIA PORTLAND CEMENT and NATIONAL MICROFINANCE 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 NATIONAL MICROFINANCE BANK are associated (or correlated) with TANZANIA PORTLAND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TANZANIA PORTLAND CEMENT has no effect on the direction of NATIONAL MICROFINANCE i.e., NATIONAL MICROFINANCE and TANZANIA PORTLAND go up and down completely randomly.
Pair Corralation between NATIONAL MICROFINANCE and TANZANIA PORTLAND
Assuming the 90 days trading horizon NATIONAL MICROFINANCE BANK is expected to generate 1.45 times more return on investment than TANZANIA PORTLAND. However, NATIONAL MICROFINANCE is 1.45 times more volatile than TANZANIA PORTLAND CEMENT. It trades about 0.32 of its potential returns per unit of risk. TANZANIA PORTLAND CEMENT is currently generating about 0.21 per unit of risk. If you would invest 535,000 in NATIONAL MICROFINANCE BANK on November 4, 2024 and sell it today you would earn a total of 50,000 from holding NATIONAL MICROFINANCE BANK or generate 9.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
NATIONAL MICROFINANCE BANK vs. TANZANIA PORTLAND CEMENT
Performance |
| Timeline |
| NATIONAL MICROFINANCE |
| TANZANIA PORTLAND CEMENT |
NATIONAL MICROFINANCE and TANZANIA PORTLAND Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NATIONAL MICROFINANCE and TANZANIA PORTLAND
The main advantage of trading using opposite NATIONAL MICROFINANCE and TANZANIA PORTLAND positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NATIONAL MICROFINANCE position performs unexpectedly, TANZANIA PORTLAND 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 TANZANIA PORTLAND will offset losses from the drop in TANZANIA PORTLAND's long position.| NATIONAL MICROFINANCE vs. YETU MICROFINANCE PLC | NATIONAL MICROFINANCE vs. CRDB BANK LTD | NATIONAL MICROFINANCE vs. NATION MEDIA GROUP | NATIONAL MICROFINANCE vs. MWALIMU MERCIAL BANK |
| TANZANIA PORTLAND vs. TANZANIA CIGARETTE LTD | TANZANIA PORTLAND vs. AFRIPRISE INVESTMENT PLC | TANZANIA PORTLAND vs. KENYA MERCIAL BANK | TANZANIA PORTLAND vs. NATIONAL MICROFINANCE BANK |
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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