Correlation Between United Overseas and Absa Group
Can any of the company-specific risk be diversified away by investing in both United Overseas and Absa Group 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 United Overseas and Absa Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Overseas Bank and Absa Group Limited, you can compare the effects of market volatilities on United Overseas and Absa Group 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 United Overseas with a short position of Absa Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Overseas and Absa Group.
Diversification Opportunities for United Overseas and Absa Group
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Absa is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding United Overseas Bank and Absa Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group Limited and United Overseas 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 United Overseas Bank are associated (or correlated) with Absa Group. 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 Limited has no effect on the direction of United Overseas i.e., United Overseas and Absa Group go up and down completely randomly.
Pair Corralation between United Overseas and Absa Group
Assuming the 90 days horizon United Overseas Bank is expected to generate 1.95 times more return on investment than Absa Group. However, United Overseas is 1.95 times more volatile than Absa Group Limited. It trades about 0.17 of its potential returns per unit of risk. Absa Group Limited is currently generating about 0.12 per unit of risk. If you would invest 4,739 in United Overseas Bank on August 25, 2024 and sell it today you would earn a total of 665.00 from holding United Overseas Bank or generate 14.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Overseas Bank vs. Absa Group Limited
Performance |
| Timeline |
| United Overseas Bank |
| Absa Group Limited |
United Overseas and Absa Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Overseas and Absa Group
The main advantage of trading using opposite United Overseas and Absa Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Overseas position performs unexpectedly, Absa Group 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 Group will offset losses from the drop in Absa Group's long position.| United Overseas vs. KBC Groep NV | United Overseas vs. DBS Group Holdings | United Overseas vs. HomeStreet | United Overseas vs. Bank of Hawaii |
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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