Correlation Between Nomura Funds and Africa Opportunity

Can any of the company-specific risk be diversified away by investing in both Nomura Funds and Africa Opportunity 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 Nomura Funds and Africa Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nomura Funds Ireland and Africa Opportunity, you can compare the effects of market volatilities on Nomura Funds and Africa Opportunity 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 Nomura Funds with a short position of Africa Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomura Funds and Africa Opportunity.

Diversification Opportunities for Nomura Funds and Africa Opportunity

0.34

Correlation Coefficient

Nomura Funds  Africa Opportunity

Weak diversification

The 3 months correlation between Nomura and Africa is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nomura Funds Ireland and Africa Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Opportunity and Nomura Funds 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 Nomura Funds Ireland are associated (or correlated) with Africa Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Opportunity has no effect on the direction of Nomura Funds i.e., Nomura Funds and Africa Opportunity go up and down completely randomly.

Pair Corralation between Nomura Funds and Africa Opportunity

Assuming the 90 days trading horizon Nomura Funds Ireland is expected to generate 1.27 times more return on investment than Africa Opportunity. However, Nomura Funds is 1.27 times more volatile than Africa Opportunity. It trades about 0.02 of its potential returns per unit of risk. Africa Opportunity is currently generating about 0.0 per unit of risk. If you would invest  1,272,148  in Nomura Funds Ireland on September 22, 2024 and sell it today you would earn a total of  21,551  from holding Nomura Funds Ireland or generate 1.69% return on investment over 90 days.

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

Nomura Funds Ireland  vs.  Africa Opportunity

Nomura Funds Ireland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nomura Funds Ireland has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, Nomura Funds is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Africa Opportunity

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Opportunity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, Africa Opportunity exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nomura Funds and Africa Opportunity

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

The idea behind Nomura Funds Ireland and Africa Opportunity 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.