Correlation Between ABSA Bank and Redefine Properties

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

Diversification Opportunities for ABSA Bank and Redefine Properties

-0.59

Correlation Coefficient

ABSA Bank  Redefine Properties

Excellent diversification

The 3 months correlation between ABSA and Redefine is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Redefine Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redefine Properties 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 Redefine Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redefine Properties has no effect on the direction of ABSA Bank i.e., ABSA Bank and Redefine Properties go up and down completely randomly.

Pair Corralation between ABSA Bank and Redefine Properties

Assuming the 90 days trading horizon ABSA Bank is expected to generate 5.69 times less return on investment than Redefine Properties. But when comparing it to its historical volatility, ABSA Bank Limited is 1.49 times less risky than Redefine Properties. It trades about 0.01 of its potential returns per unit of risk. Redefine Properties is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  38,404  in Redefine Properties on October 23, 2024 and sell it today you would earn a total of  4,696  from holding Redefine Properties or generate 12.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

ABSA Bank Limited  vs.  Redefine Properties

ABSA Bank Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABSA Bank Limited are ranked lower than 1 (%) 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.

Redefine Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redefine Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ABSA Bank and Redefine Properties

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

The idea behind ABSA Bank Limited and Redefine Properties 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.