Correlation Between AFRICAN ALLIANCE and DN TYRE

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

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

Diversification Opportunities for AFRICAN ALLIANCE and DN TYRE

1.0

Correlation Coefficient

AFRICAN ALLIANCE  DN TYRE

No risk reduction

The 3 months correlation between AFRICAN and DUNLOP is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding AFRICAN ALLIANCE INSURANCE and DN TYRE RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DN TYRE RUBBER and AFRICAN ALLIANCE 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 ALLIANCE INSURANCE are associated (or correlated) with DN TYRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DN TYRE RUBBER has no effect on the direction of AFRICAN ALLIANCE i.e., AFRICAN ALLIANCE and DN TYRE go up and down completely randomly.

Pair Corralation between AFRICAN ALLIANCE and DN TYRE

If you would invest  20.00  in DN TYRE RUBBER on September 4, 2024 and sell it today you would earn a total of  0.00  from holding DN TYRE RUBBER or generate 0.0% return on investment over 90 days.

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

AFRICAN ALLIANCE INSURANCE  vs.  DN TYRE RUBBER

AFRICAN ALLIANCE INS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFRICAN ALLIANCE INSURANCE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AFRICAN ALLIANCE is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

DN TYRE RUBBER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DN TYRE RUBBER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DN TYRE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AFRICAN ALLIANCE and DN TYRE

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

The idea behind AFRICAN ALLIANCE INSURANCE and DN TYRE RUBBER 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.