Correlation Between We Buy and Investec
Can any of the company-specific risk be diversified away by investing in both We Buy and Investec 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 Investec 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 Investec, you can compare the effects of market volatilities on We Buy and Investec 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 Investec. Check out your portfolio center. Please also check ongoing floating volatility patterns of We Buy and Investec.
Diversification Opportunities for We Buy and Investec
Modest diversification
The 3 months correlation between WBC and Investec is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding We Buy Cars and Investec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec has no effect on the direction of We Buy i.e., We Buy and Investec go up and down completely randomly.
Pair Corralation between We Buy and Investec
Assuming the 90 days trading horizon We Buy Cars is expected to generate 1.41 times more return on investment than Investec. However, We Buy is 1.41 times more volatile than Investec. It trades about 0.25 of its potential returns per unit of risk. Investec is currently generating about 0.06 per unit of risk. If you would invest 204,000 in We Buy Cars on September 2, 2024 and sell it today you would earn a total of 249,000 from holding We Buy Cars or generate 122.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 43.94% |
| Values | Daily Returns |
We Buy Cars vs. Investec
Performance |
| Timeline |
| We Buy Cars |
| Investec |
We Buy and Investec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with We Buy and Investec
The main advantage of trading using opposite We Buy and Investec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if We Buy position performs unexpectedly, Investec 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 Investec will offset losses from the drop in Investec's long position.| We Buy vs. Hosken Consolidated Investments | We Buy vs. Safari Investments RSA | We Buy vs. Reinet Investments SCA | We Buy vs. Afine Investments |
| Investec vs. ABSA Bank Limited | Investec vs. Capitec Bank Holdings | Investec vs. Standard Bank Group | Investec vs. Absa 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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