Correlation Between Absa Multi and NewFunds TRACI

Can any of the company-specific risk be diversified away by investing in both Absa Multi and NewFunds TRACI 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 TRACI 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 TRACI 3, you can compare the effects of market volatilities on Absa Multi and NewFunds TRACI 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 TRACI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Multi and NewFunds TRACI.

Diversification Opportunities for Absa Multi and NewFunds TRACI

0.45

Correlation Coefficient

Absa Multi  NewFunds TRACI

Very weak diversification

The 3 months correlation between Absa and NewFunds is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Absa Multi Managed and NewFunds TRACI 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFunds TRACI 3 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 TRACI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFunds TRACI 3 has no effect on the direction of Absa Multi i.e., Absa Multi and NewFunds TRACI go up and down completely randomly.

Pair Corralation between Absa Multi and NewFunds TRACI

Assuming the 90 days trading horizon Absa Multi is expected to generate 1.41 times less return on investment than NewFunds TRACI. In addition to that, Absa Multi is 1.1 times more volatile than NewFunds TRACI 3. It trades about 0.05 of its total potential returns per unit of risk. NewFunds TRACI 3 is currently generating about 0.08 per unit of volatility. If you would invest  347,400  in NewFunds TRACI 3 on October 24, 2024 and sell it today you would earn a total of  6,000  from holding NewFunds TRACI 3 or generate 1.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Absa Multi Managed  vs.  NewFunds TRACI 3

Absa Multi Managed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Multi Managed are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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 TRACI 3

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds TRACI 3 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NewFunds TRACI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Absa Multi and NewFunds TRACI

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

The idea behind Absa Multi Managed and NewFunds TRACI 3 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.