Correlation Between We Buy and AfroCentric Investment
Can any of the company-specific risk be diversified away by investing in both We Buy and AfroCentric Investment 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 We Buy and AfroCentric Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between We Buy Cars and AfroCentric Investment Corp, you can compare the effects of market volatilities on We Buy and AfroCentric Investment 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 We Buy with a short position of AfroCentric Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of We Buy and AfroCentric Investment.
Diversification Opportunities for We Buy and AfroCentric Investment
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between WBC and AfroCentric is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding We Buy Cars and AfroCentric Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfroCentric Investment and We Buy 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 We Buy Cars are associated (or correlated) with AfroCentric Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfroCentric Investment has no effect on the direction of We Buy i.e., We Buy and AfroCentric Investment go up and down completely randomly.
Pair Corralation between We Buy and AfroCentric Investment
Assuming the 90 days trading horizon We Buy Cars is expected to generate 0.39 times more return on investment than AfroCentric Investment. However, We Buy Cars is 2.59 times less risky than AfroCentric Investment. It trades about 0.36 of its potential returns per unit of risk. AfroCentric Investment Corp is currently generating about -0.16 per unit of risk. If you would invest 387,383 in We Buy Cars on September 15, 2024 and sell it today you would earn a total of 70,617 from holding We Buy Cars or generate 18.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
We Buy Cars vs. AfroCentric Investment Corp
Performance |
| Timeline |
| We Buy Cars |
| AfroCentric Investment |
We Buy and AfroCentric Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with We Buy and AfroCentric Investment
The main advantage of trading using opposite We Buy and AfroCentric Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if We Buy position performs unexpectedly, AfroCentric Investment 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 AfroCentric Investment will offset losses from the drop in AfroCentric Investment's long position.| We Buy vs. Harmony Gold Mining | We Buy vs. Frontier Transport Holdings | We Buy vs. Bytes Technology | We Buy vs. African Media Entertainment |
| AfroCentric Investment vs. We Buy Cars | AfroCentric Investment vs. Hosken Consolidated Investments | AfroCentric Investment vs. Frontier Transport Holdings | AfroCentric Investment vs. MC Mining |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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