Correlation Between We Buy and Pan African
Can any of the company-specific risk be diversified away by investing in both We Buy and Pan African 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 Pan African 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 Pan African Resources, you can compare the effects of market volatilities on We Buy and Pan African 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 Pan African. Check out your portfolio center. Please also check ongoing floating volatility patterns of We Buy and Pan African.
Diversification Opportunities for We Buy and Pan African
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WBC and Pan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding We Buy Cars and Pan African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan African Resources 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 Pan African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan African Resources has no effect on the direction of We Buy i.e., We Buy and Pan African go up and down completely randomly.
Pair Corralation between We Buy and Pan African
Assuming the 90 days trading horizon We Buy Cars is expected to generate 0.57 times more return on investment than Pan African. However, We Buy Cars is 1.74 times less risky than Pan African. It trades about 0.63 of its potential returns per unit of risk. Pan African Resources is currently generating about 0.02 per unit of risk. If you would invest 351,900 in We Buy Cars on August 28, 2024 and sell it today you would earn a total of 86,300 from holding We Buy Cars or generate 24.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
We Buy Cars vs. Pan African Resources
Performance |
| Timeline |
| We Buy Cars |
| Pan African Resources |
We Buy and Pan African Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with We Buy and Pan African
The main advantage of trading using opposite We Buy and Pan African positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if We Buy position performs unexpectedly, Pan African 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 Pan African will offset losses from the drop in Pan African's long position.| We Buy vs. eMedia Holdings Limited | We Buy vs. Deneb Investments | We Buy vs. Hosken Consolidated Investments | We Buy vs. Astoria Investments |
| Pan African vs. Ascendis Health | Pan African vs. Astoria Investments | Pan African vs. Advtech | Pan African vs. Bytes Technology |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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