Correlation Between ABSA Bank and Boxer Retail

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

Diversification Opportunities for ABSA Bank and Boxer Retail

-0.16

Correlation Coefficient

ABSA Bank  Boxer Retail

Good diversification

The 3 months correlation between ABSA and Boxer is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Boxer Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boxer Retail 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 Boxer Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boxer Retail has no effect on the direction of ABSA Bank i.e., ABSA Bank and Boxer Retail go up and down completely randomly.

Pair Corralation between ABSA Bank and Boxer Retail

Assuming the 90 days trading horizon ABSA Bank is expected to generate 12.45 times less return on investment than Boxer Retail. But when comparing it to its historical volatility, ABSA Bank Limited is 4.99 times less risky than Boxer Retail. It trades about 0.11 of its potential returns per unit of risk. Boxer Retail is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  540,000  in Boxer Retail on September 18, 2024 and sell it today you would earn a total of  108,500  from holding Boxer Retail or generate 20.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.81%
Values	Daily Returns

ABSA Bank Limited  vs.  Boxer Retail

ABSA Bank Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABSA Bank Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ABSA Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boxer Retail

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boxer Retail are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Boxer Retail exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABSA Bank and Boxer Retail

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

The idea behind ABSA Bank Limited and Boxer Retail 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.