Correlation Between African Rainbow and Remgro
Can any of the company-specific risk be diversified away by investing in both African Rainbow and Remgro 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 Rainbow and Remgro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Rainbow Capital and Remgro, you can compare the effects of market volatilities on African Rainbow and Remgro 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 Rainbow with a short position of Remgro. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Rainbow and Remgro.
Diversification Opportunities for African Rainbow and Remgro
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between African and Remgro is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Capital and Remgro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Remgro and African Rainbow 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 Rainbow Capital are associated (or correlated) with Remgro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Remgro has no effect on the direction of African Rainbow i.e., African Rainbow and Remgro go up and down completely randomly.
Pair Corralation between African Rainbow and Remgro
Assuming the 90 days trading horizon African Rainbow Capital is expected to generate 1.65 times more return on investment than Remgro. However, African Rainbow is 1.65 times more volatile than Remgro. It trades about 0.05 of its potential returns per unit of risk. Remgro is currently generating about 0.03 per unit of risk. If you would invest 61,200 in African Rainbow Capital on September 23, 2024 and sell it today you would earn a total of 33,800 from holding African Rainbow Capital or generate 55.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
African Rainbow Capital vs. Remgro
Performance |
Timeline |
African Rainbow Capital |
Remgro |
African Rainbow and Remgro Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with African Rainbow and Remgro
The main advantage of trading using opposite African Rainbow and Remgro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Rainbow position performs unexpectedly, Remgro 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 Remgro will offset losses from the drop in Remgro's long position.African Rainbow vs. Remgro | African Rainbow vs. Reinet Investments SCA | African Rainbow vs. Brait SE | African Rainbow vs. Zeder Investments |
Remgro vs. HomeChoice Investments | Remgro vs. Hosken Consolidated Investments | Remgro vs. Deneb Investments | Remgro vs. African Media Entertainment |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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