Correlation Between African Rainbow and Clicks
Can any of the company-specific risk be diversified away by investing in both African Rainbow and Clicks 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 Clicks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Rainbow Minerals and Clicks, you can compare the effects of market volatilities on African Rainbow and Clicks 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 Clicks. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Rainbow and Clicks.
Diversification Opportunities for African Rainbow and Clicks
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between African and Clicks is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Minerals and Clicks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clicks 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 Minerals are associated (or correlated) with Clicks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clicks has no effect on the direction of African Rainbow i.e., African Rainbow and Clicks go up and down completely randomly.
Pair Corralation between African Rainbow and Clicks
Assuming the 90 days trading horizon African Rainbow Minerals is expected to under-perform the Clicks. In addition to that, African Rainbow is 1.61 times more volatile than Clicks. It trades about -0.07 of its total potential returns per unit of risk. Clicks is currently generating about 0.13 per unit of volatility. If you would invest 2,931,957 in Clicks on September 24, 2024 and sell it today you would earn a total of 926,343 from holding Clicks or generate 31.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
African Rainbow Minerals vs. Clicks
Performance |
Timeline |
African Rainbow Minerals |
Clicks |
African Rainbow and Clicks Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with African Rainbow and Clicks
The main advantage of trading using opposite African Rainbow and Clicks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Rainbow position performs unexpectedly, Clicks 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 Clicks will offset losses from the drop in Clicks' long position.African Rainbow vs. Glencore PLC | African Rainbow vs. South32 | African Rainbow vs. Jubilee Platinum | African Rainbow vs. Wesizwe |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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