Correlation Between AfroCentric Investment and Absa

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

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

Diversification Opportunities for AfroCentric Investment and Absa

-0.73

Correlation Coefficient

AfroCentric Investment  Absa

Pay attention - limited upside

The 3 months correlation between AfroCentric and Absa is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding AfroCentric Investment Corp and Absa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group and AfroCentric Investment 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 AfroCentric Investment Corp are associated (or correlated) with Absa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Group has no effect on the direction of AfroCentric Investment i.e., AfroCentric Investment and Absa go up and down completely randomly.

Pair Corralation between AfroCentric Investment and Absa

Assuming the 90 days trading horizon AfroCentric Investment Corp is expected to under-perform the Absa. In addition to that, AfroCentric Investment is 5.02 times more volatile than Absa Group. It trades about -0.04 of its total potential returns per unit of risk. Absa Group is currently generating about -0.01 per unit of volatility. If you would invest  1,961,700  in Absa Group on October 10, 2024 and sell it today you would lose (6,000) from holding Absa Group or give up 0.31% of portfolio value over 90 days.

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

AfroCentric Investment Corp  vs.  Absa Group

AfroCentric Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AfroCentric Investment Corp 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.

Absa Group

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with AfroCentric Investment and Absa

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

The idea behind AfroCentric Investment Corp and Absa Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.