Correlation Between Pan African and Ascendis Health
Can any of the company-specific risk be diversified away by investing in both Pan African and Ascendis Health 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 Pan African and Ascendis Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan African Resources and Ascendis Health, you can compare the effects of market volatilities on Pan African and Ascendis Health 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 Pan African with a short position of Ascendis Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan African and Ascendis Health.
Diversification Opportunities for Pan African and Ascendis Health
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pan and Ascendis is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pan African Resources and Ascendis Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascendis Health and Pan African 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 Pan African Resources are associated (or correlated) with Ascendis Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascendis Health has no effect on the direction of Pan African i.e., Pan African and Ascendis Health go up and down completely randomly.
Pair Corralation between Pan African and Ascendis Health
Assuming the 90 days trading horizon Pan African Resources is expected to generate 0.93 times more return on investment than Ascendis Health. However, Pan African Resources is 1.08 times less risky than Ascendis Health. It trades about 0.11 of its potential returns per unit of risk. Ascendis Health is currently generating about 0.03 per unit of risk. If you would invest 31,900 in Pan African Resources on August 31, 2024 and sell it today you would earn a total of 47,600 from holding Pan African Resources or generate 149.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Pan African Resources vs. Ascendis Health
Performance |
| Timeline |
| Pan African Resources |
| Ascendis Health |
Pan African and Ascendis Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan African and Ascendis Health
The main advantage of trading using opposite Pan African and Ascendis Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan African position performs unexpectedly, Ascendis Health 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 Ascendis Health will offset losses from the drop in Ascendis Health's long position.The idea behind Pan African Resources and Ascendis Health 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.| Ascendis Health vs. We Buy Cars | Ascendis Health vs. ABSA Bank Limited | Ascendis Health vs. Standard Bank Group | Ascendis Health vs. Zeder Investments |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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