Correlation Between RCL Foods and Afrimat
Can any of the company-specific risk be diversified away by investing in both RCL Foods and Afrimat 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 RCL Foods and Afrimat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCL Foods and Afrimat, you can compare the effects of market volatilities on RCL Foods and Afrimat 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 RCL Foods with a short position of Afrimat. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCL Foods and Afrimat.
Diversification Opportunities for RCL Foods and Afrimat
Good diversification
The 3 months correlation between RCL and Afrimat is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Afrimat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afrimat and RCL Foods 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 RCL Foods are associated (or correlated) with Afrimat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afrimat has no effect on the direction of RCL Foods i.e., RCL Foods and Afrimat go up and down completely randomly.
Pair Corralation between RCL Foods and Afrimat
Assuming the 90 days trading horizon RCL Foods is expected to generate 21.19 times less return on investment than Afrimat. But when comparing it to its historical volatility, RCL Foods is 3.77 times less risky than Afrimat. It trades about 0.01 of its potential returns per unit of risk. Afrimat is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 509,208 in Afrimat on September 3, 2024 and sell it today you would earn a total of 142,092 from holding Afrimat or generate 27.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCL Foods vs. Afrimat
Performance |
| Timeline |
| RCL Foods |
| Afrimat |
RCL Foods and Afrimat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCL Foods and Afrimat
The main advantage of trading using opposite RCL Foods and Afrimat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods position performs unexpectedly, Afrimat 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 Afrimat will offset losses from the drop in Afrimat's long position.| RCL Foods vs. Blue Label Telecoms | RCL Foods vs. African Media Entertainment | RCL Foods vs. Life Healthcare | RCL Foods vs. Kap Industrial Holdings |
| Afrimat vs. Deneb Investments | Afrimat vs. Frontier Transport Holdings | Afrimat vs. RCL Foods | Afrimat vs. Astral Foods |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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