Correlation Between Absa and Granprade

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

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

Diversification Opportunities for Absa and Granprade

0.34

Correlation Coefficient

Absa  Granprade

Weak diversification

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

Pair Corralation between Absa and Granprade

Assuming the 90 days trading horizon Absa Group is expected to generate 0.58 times more return on investment than Granprade. However, Absa Group is 1.73 times less risky than Granprade. It trades about -0.03 of its potential returns per unit of risk. Granprade is currently generating about -0.09 per unit of risk. If you would invest  1,901,600  in Absa Group on December 28, 2024 and sell it today you would lose (53,800) from holding Absa Group or give up 2.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Absa Group  vs.  Granprade

Absa Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Absa Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Absa is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Granprade

Risk-Adjusted Performance

Very Weak

Over the last 90 days Granprade has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Absa and Granprade

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

The idea behind Absa Group and Granprade 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.