Correlation Between ABSA Bank and Aspen Pharmacare

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

By analyzing existing cross correlation between ABSA Bank Limited and Aspen Pharmacare Holdings, you can compare the effects of market volatilities on ABSA Bank and Aspen Pharmacare 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 Bank with a short position of Aspen Pharmacare. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABSA Bank and Aspen Pharmacare.

Diversification Opportunities for ABSA Bank and Aspen Pharmacare

-0.9

Correlation Coefficient

ABSA Bank  Aspen Pharmacare

Pay attention - limited upside

The 3 months correlation between ABSA and Aspen is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Aspen Pharmacare Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Pharmacare Holdings and ABSA 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 ABSA Bank Limited are associated (or correlated) with Aspen Pharmacare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Pharmacare Holdings has no effect on the direction of ABSA Bank i.e., ABSA Bank and Aspen Pharmacare go up and down completely randomly.

Pair Corralation between ABSA Bank and Aspen Pharmacare

Assuming the 90 days trading horizon ABSA Bank Limited is expected to under-perform the Aspen Pharmacare. But the stock apears to be less risky and, when comparing its historical volatility, ABSA Bank Limited is 2.01 times less risky than Aspen Pharmacare. The stock trades about 0.0 of its potential returns per unit of risk. The Aspen Pharmacare Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,700,700  in Aspen Pharmacare Holdings on September 23, 2024 and sell it today you would earn a total of  37,100  from holding Aspen Pharmacare Holdings or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ABSA Bank Limited  vs.  Aspen Pharmacare Holdings

ABSA Bank Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABSA Bank Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ABSA Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Aspen Pharmacare Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Pharmacare Holdings 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 Bank and Aspen Pharmacare

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

The idea behind ABSA Bank Limited and Aspen Pharmacare Holdings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.