Correlation Between Premier African and Polar Capital
Can any of the company-specific risk be diversified away by investing in both Premier African and Polar Capital 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 Premier African and Polar Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier African Minerals and Polar Capital Technology, you can compare the effects of market volatilities on Premier African and Polar Capital 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 Premier African with a short position of Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier African and Polar Capital.
Diversification Opportunities for Premier African and Polar Capital
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Premier and Polar is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Premier African Minerals and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology and Premier 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 Premier African Minerals are associated (or correlated) with Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Premier African i.e., Premier African and Polar Capital go up and down completely randomly.
Pair Corralation between Premier African and Polar Capital
Assuming the 90 days trading horizon Premier African Minerals is expected to under-perform the Polar Capital. In addition to that, Premier African is 6.11 times more volatile than Polar Capital Technology. It trades about -0.04 of its total potential returns per unit of risk. Polar Capital Technology is currently generating about 0.09 per unit of volatility. If you would invest 20,000 in Polar Capital Technology on October 30, 2024 and sell it today you would earn a total of 15,650 from holding Polar Capital Technology or generate 78.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier African Minerals vs. Polar Capital Technology
Performance |
| Timeline |
| Premier African Minerals |
| Polar Capital Technology |
Premier African and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier African and Polar Capital
The main advantage of trading using opposite Premier African and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier African position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.| Premier African vs. BW Offshore | Premier African vs. Spirent Communications plc | Premier African vs. Oxford Technology 2 | Premier African vs. Verizon Communications |
| Polar Capital vs. Pressure Technologies Plc | Polar Capital vs. Solstad Offshore ASA | Polar Capital vs. International Consolidated Airlines | Polar Capital vs. Made Tech Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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