Correlation Between Aveng and Tiger Brands

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

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

Diversification Opportunities for Aveng and Tiger Brands

0.71

Correlation Coefficient

Aveng  Tiger Brands

Poor diversification

The 3 months correlation between Aveng and Tiger is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and Tiger Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiger Brands and Aveng 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 Aveng are associated (or correlated) with Tiger Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiger Brands has no effect on the direction of Aveng i.e., Aveng and Tiger Brands go up and down completely randomly.

Pair Corralation between Aveng and Tiger Brands

Assuming the 90 days trading horizon Aveng is expected to generate 3.75 times less return on investment than Tiger Brands. But when comparing it to its historical volatility, Aveng is 1.01 times less risky than Tiger Brands. It trades about 0.18 of its potential returns per unit of risk. Tiger Brands is currently generating about 0.68 of returns per unit of risk over similar time horizon. If you would invest  2,459,600  in Tiger Brands on September 24, 2024 and sell it today you would earn a total of  484,300  from holding Tiger Brands or generate 19.69% return on investment over 90 days.

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

Aveng  vs.  Tiger Brands

Aveng

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tiger Brands

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tiger Brands are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Tiger Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aveng and Tiger Brands

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

The idea behind Aveng and Tiger Brands 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.