Correlation Between WEMA BANK and AFROMEDIA PLC

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Can any of the company-specific risk be diversified away by investing in both WEMA BANK and AFROMEDIA PLC 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 WEMA BANK and AFROMEDIA PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEMA BANK PLC and AFROMEDIA PLC, you can compare the effects of market volatilities on WEMA BANK and AFROMEDIA PLC 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 WEMA BANK with a short position of AFROMEDIA PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEMA BANK and AFROMEDIA PLC.

Diversification Opportunities for WEMA BANK and AFROMEDIA PLC

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between WEMA and AFROMEDIA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding WEMA BANK PLC and AFROMEDIA PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFROMEDIA PLC and WEMA BANK 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 WEMA BANK PLC are associated (or correlated) with AFROMEDIA PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFROMEDIA PLC has no effect on the direction of WEMA BANK i.e., WEMA BANK and AFROMEDIA PLC go up and down completely randomly.

Pair Corralation between WEMA BANK and AFROMEDIA PLC

Assuming the 90 days trading horizon WEMA BANK PLC is expected to generate 3.25 times more return on investment than AFROMEDIA PLC. However, WEMA BANK is 3.25 times more volatile than AFROMEDIA PLC. It trades about 0.09 of its potential returns per unit of risk. AFROMEDIA PLC is currently generating about 0.04 per unit of risk. If you would invest  348.00  in WEMA BANK PLC on November 5, 2024 and sell it today you would earn a total of  797.00  from holding WEMA BANK PLC or generate 229.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy87.47%
ValuesDaily Returns

WEMA BANK PLC  vs.  AFROMEDIA PLC

 Performance 
       Timeline  
WEMA BANK PLC 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in WEMA BANK PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, WEMA BANK displayed solid returns over the last few months and may actually be approaching a breakup point.
AFROMEDIA PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AFROMEDIA PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, AFROMEDIA PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

WEMA BANK and AFROMEDIA PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WEMA BANK and AFROMEDIA PLC

The main advantage of trading using opposite WEMA BANK and AFROMEDIA PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEMA BANK position performs unexpectedly, AFROMEDIA PLC 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 AFROMEDIA PLC will offset losses from the drop in AFROMEDIA PLC's long position.
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The idea behind WEMA BANK PLC and AFROMEDIA PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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