Correlation Between African Discovery and Emeco Holdings

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

By analyzing existing cross correlation between African Discovery Group and Emeco Holdings Limited, you can compare the effects of market volatilities on African Discovery and Emeco Holdings 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 African Discovery with a short position of Emeco Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Discovery and Emeco Holdings.

Diversification Opportunities for African Discovery and Emeco Holdings

0.0

Correlation Coefficient

African Discovery  Emeco Holdings

Pay attention - limited upside

The 3 months correlation between African and Emeco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding African Discovery Group and Emeco Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emeco Holdings and African Discovery 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 African Discovery Group are associated (or correlated) with Emeco Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emeco Holdings has no effect on the direction of African Discovery i.e., African Discovery and Emeco Holdings go up and down completely randomly.

Pair Corralation between African Discovery and Emeco Holdings

If you would invest  49.00  in Emeco Holdings Limited on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Emeco Holdings Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

African Discovery Group  vs.  Emeco Holdings Limited

African Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days African Discovery Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Emeco Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emeco Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Emeco Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with African Discovery and Emeco Holdings

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

The idea behind African Discovery Group and Emeco Holdings Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.