Correlation Between Absa Multi and NewFunds Shariah

Can any of the company-specific risk be diversified away by investing in both Absa Multi and NewFunds Shariah 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 Absa Multi and NewFunds Shariah into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Absa Multi Managed and NewFunds Shariah Top, you can compare the effects of market volatilities on Absa Multi and NewFunds Shariah 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 Absa Multi with a short position of NewFunds Shariah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Multi and NewFunds Shariah.

Diversification Opportunities for Absa Multi and NewFunds Shariah

0.39

Correlation Coefficient

Absa Multi  NewFunds Shariah

Weak diversification

The 3 months correlation between Absa and NewFunds is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Absa Multi Managed and NewFunds Shariah Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFunds Shariah Top and Absa Multi 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 Absa Multi Managed are associated (or correlated) with NewFunds Shariah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFunds Shariah Top has no effect on the direction of Absa Multi i.e., Absa Multi and NewFunds Shariah go up and down completely randomly.

Pair Corralation between Absa Multi and NewFunds Shariah

Assuming the 90 days trading horizon Absa Multi is expected to generate 392.86 times less return on investment than NewFunds Shariah. But when comparing it to its historical volatility, Absa Multi Managed is 2.89 times less risky than NewFunds Shariah. It trades about 0.0 of its potential returns per unit of risk. NewFunds Shariah Top is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  34,700  in NewFunds Shariah Top on December 27, 2024 and sell it today you would earn a total of  6,300  from holding NewFunds Shariah Top or generate 18.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Absa Multi Managed  vs.  NewFunds Shariah Top

Absa Multi Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Absa Multi Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Absa Multi is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

NewFunds Shariah Top

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds Shariah Top are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NewFunds Shariah sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Absa Multi and NewFunds Shariah

The main advantage of trading using opposite Absa Multi and NewFunds Shariah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absa Multi position performs unexpectedly, NewFunds Shariah 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 NewFunds Shariah will offset losses from the drop in NewFunds Shariah's long position.

The idea behind Absa Multi Managed and NewFunds Shariah Top 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.