Correlation Between AFREXIMBANK and AFRICAN DOMESTIC

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

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

Diversification Opportunities for AFREXIMBANK and AFRICAN DOMESTIC

0.16

Correlation Coefficient

AFREXIMBANK  AFRICAN DOMESTIC

Average diversification

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

Pair Corralation between AFREXIMBANK and AFRICAN DOMESTIC

Assuming the 90 days trading horizon AFREXIMBANK is expected to under-perform the AFRICAN DOMESTIC. But the stock apears to be less risky and, when comparing its historical volatility, AFREXIMBANK is 1.04 times less risky than AFRICAN DOMESTIC. The stock trades about -0.07 of its potential returns per unit of risk. The AFRICAN DOMESTIC BOND is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  600.00  in AFRICAN DOMESTIC BOND on September 26, 2024 and sell it today you would earn a total of  26.00  from holding AFRICAN DOMESTIC BOND or generate 4.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

AFREXIMBANK  vs.  AFRICAN DOMESTIC BOND

AFREXIMBANK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFREXIMBANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AFREXIMBANK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AFRICAN DOMESTIC BOND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFRICAN DOMESTIC BOND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AFRICAN DOMESTIC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AFREXIMBANK and AFRICAN DOMESTIC

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

The idea behind AFREXIMBANK and AFRICAN DOMESTIC BOND 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.