Correlation Between African Media and Nedbank

Can any of the company-specific risk be diversified away by investing in both African Media and Nedbank 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 Nedbank 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 Nedbank Group, you can compare the effects of market volatilities on African Media and Nedbank 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 Nedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Media and Nedbank.

Diversification Opportunities for African Media and Nedbank

-0.2

Correlation Coefficient

African Media  Nedbank

Good diversification

The 3 months correlation between African and Nedbank is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding African Media Entertainment and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group 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 Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of African Media i.e., African Media and Nedbank go up and down completely randomly.

Pair Corralation between African Media and Nedbank

Assuming the 90 days trading horizon African Media Entertainment is expected to generate 30.79 times more return on investment than Nedbank. However, African Media is 30.79 times more volatile than Nedbank Group. It trades about 0.04 of its potential returns per unit of risk. Nedbank Group is currently generating about 0.06 per unit of risk. If you would invest  272,280  in African Media Entertainment on October 11, 2024 and sell it today you would earn a total of  131,320  from holding African Media Entertainment or generate 48.23% 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.  Nedbank Group

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 weak technical and fundamental indicators, African Media may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nedbank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Nedbank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with African Media and Nedbank

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

The idea behind African Media Entertainment and Nedbank Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.