Correlation Between African Media and AfricaRhodium ETF

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

By analyzing existing cross correlation between African Media Entertainment and AfricaRhodium ETF, you can compare the effects of market volatilities on African Media and AfricaRhodium ETF 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 Media with a short position of AfricaRhodium ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Media and AfricaRhodium ETF.

Diversification Opportunities for African Media and AfricaRhodium ETF

-0.07

Correlation Coefficient

African Media  AfricaRhodium ETF

Good diversification

The 3 months correlation between African and AfricaRhodium is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding African Media Entertainment and AfricaRhodium ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfricaRhodium ETF and African Media 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 Media Entertainment are associated (or correlated) with AfricaRhodium ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfricaRhodium ETF has no effect on the direction of African Media i.e., African Media and AfricaRhodium ETF go up and down completely randomly.

Pair Corralation between African Media and AfricaRhodium ETF

Assuming the 90 days trading horizon African Media Entertainment is expected to generate 0.92 times more return on investment than AfricaRhodium ETF. However, African Media Entertainment is 1.08 times less risky than AfricaRhodium ETF. It trades about 0.03 of its potential returns per unit of risk. AfricaRhodium ETF is currently generating about -0.02 per unit of risk. If you would invest  399,900  in African Media Entertainment on September 12, 2024 and sell it today you would earn a total of  10,100  from holding African Media Entertainment or generate 2.53% return on investment over 90 days.

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

African Media Entertainment  vs.  AfricaRhodium ETF

African Media Entert

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in African Media Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, African Media is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

AfricaRhodium ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with African Media and AfricaRhodium ETF

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

The idea behind African Media Entertainment and AfricaRhodium ETF 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.