Correlation Between Absa Group and First Capital

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

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

Diversification Opportunities for Absa Group and First Capital

0.0

Correlation Coefficient

Absa Group  First Capital

Pay attention - limited upside

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

Pair Corralation between Absa Group and First Capital

If you would invest  811.00  in Absa Group Limited on September 20, 2024 and sell it today you would earn a total of  0.00  from holding Absa Group Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Absa Group Limited  vs.  First Capital

Absa Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Absa Group and First Capital

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

The idea behind Absa Group Limited and First Capital 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.