Correlation Between RMB Holdings and Absa
Can any of the company-specific risk be diversified away by investing in both RMB Holdings and Absa 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 RMB Holdings and Absa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RMB Holdings and Absa Group, you can compare the effects of market volatilities on RMB Holdings and Absa 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 RMB Holdings with a short position of Absa. Check out your portfolio center. Please also check ongoing floating volatility patterns of RMB Holdings and Absa.
Diversification Opportunities for RMB Holdings and Absa
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between RMB and Absa is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding RMB Holdings and Absa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group and RMB Holdings 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 RMB Holdings are associated (or correlated) with Absa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Group has no effect on the direction of RMB Holdings i.e., RMB Holdings and Absa go up and down completely randomly.
Pair Corralation between RMB Holdings and Absa
Assuming the 90 days trading horizon RMB Holdings is expected to under-perform the Absa. In addition to that, RMB Holdings is 1.68 times more volatile than Absa Group. It trades about -0.01 of its total potential returns per unit of risk. Absa Group is currently generating about 0.01 per unit of volatility. If you would invest 1,656,937 in Absa Group on August 30, 2024 and sell it today you would earn a total of 73,063 from holding Absa Group or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RMB Holdings vs. Absa Group
Performance |
| Timeline |
| RMB Holdings |
| Absa Group |
RMB Holdings and Absa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RMB Holdings and Absa
The main advantage of trading using opposite RMB Holdings and Absa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RMB Holdings position performs unexpectedly, Absa 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 Absa will offset losses from the drop in Absa's long position.| RMB Holdings vs. Master Drilling Group | RMB Holdings vs. Standard Bank Group | RMB Holdings vs. RCL Foods | RMB Holdings vs. Ascendis Health |
| Absa vs. Capitec Bank Holdings | Absa vs. Standard Bank Group | Absa vs. Capitec Bank Holdings | Absa vs. Nedbank 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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