Correlation Between Astoria Investments and African Rainbow

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

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

Diversification Opportunities for Astoria Investments and African Rainbow

0.01

Correlation Coefficient

Astoria Investments  African Rainbow

Significant diversification

The 3 months correlation between Astoria and African is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Astoria Investments and African Rainbow Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Rainbow Capital and Astoria Investments 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 Astoria Investments are associated (or correlated) with African Rainbow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Rainbow Capital has no effect on the direction of Astoria Investments i.e., Astoria Investments and African Rainbow go up and down completely randomly.

Pair Corralation between Astoria Investments and African Rainbow

Assuming the 90 days trading horizon Astoria Investments is expected to generate 4.89 times less return on investment than African Rainbow. In addition to that, Astoria Investments is 1.36 times more volatile than African Rainbow Capital. It trades about 0.01 of its total potential returns per unit of risk. African Rainbow Capital is currently generating about 0.09 per unit of volatility. If you would invest  50,900  in African Rainbow Capital on October 11, 2024 and sell it today you would earn a total of  42,000  from holding African Rainbow Capital or generate 82.51% return on investment over 90 days.

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

Astoria Investments  vs.  African Rainbow Capital

Astoria Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

African Rainbow Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in African Rainbow Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, African Rainbow exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astoria Investments and African Rainbow

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

The idea behind Astoria Investments and African Rainbow 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.