Correlation Between Pan African and Old Mutual

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Can any of the company-specific risk be diversified away by investing in both Pan African and Old Mutual 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 Old Mutual 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 Old Mutual, you can compare the effects of market volatilities on Pan African and Old Mutual 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 Old Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan African and Old Mutual.

Diversification Opportunities for Pan African and Old Mutual

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Pan and Old is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pan African Resources and Old Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Mutual 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 Old Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Mutual has no effect on the direction of Pan African i.e., Pan African and Old Mutual go up and down completely randomly.

Pair Corralation between Pan African and Old Mutual

Assuming the 90 days trading horizon Pan African Resources is expected to generate 1.43 times more return on investment than Old Mutual. However, Pan African is 1.43 times more volatile than Old Mutual. It trades about 0.16 of its potential returns per unit of risk. Old Mutual is currently generating about 0.06 per unit of risk. If you would invest  36,500  in Pan African Resources on September 8, 2024 and sell it today you would earn a total of  49,900  from holding Pan African Resources or generate 136.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Pan African Resources  vs.  Old Mutual

 Performance 
       Timeline  
Pan African Resources 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pan African Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pan African exhibited solid returns over the last few months and may actually be approaching a breakup point.
Old Mutual 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Old Mutual are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Old Mutual is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pan African and Old Mutual Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pan African and Old Mutual

The main advantage of trading using opposite Pan African and Old Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan African position performs unexpectedly, Old Mutual 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 Old Mutual will offset losses from the drop in Old Mutual's long position.
The idea behind Pan African Resources and Old Mutual 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.
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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