Correlation Between African Rainbow and CoreShares TotalWldStock

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

Diversification Opportunities for African Rainbow and CoreShares TotalWldStock

0.17

Correlation Coefficient

African Rainbow  CoreShares TotalWldStock

Average diversification

The 3 months correlation between African and CoreShares is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Minerals and CoreShares TotalWldStock ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreShares TotalWldStock 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 CoreShares TotalWldStock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreShares TotalWldStock has no effect on the direction of African Rainbow i.e., African Rainbow and CoreShares TotalWldStock go up and down completely randomly.

Pair Corralation between African Rainbow and CoreShares TotalWldStock

Assuming the 90 days trading horizon African Rainbow Minerals is expected to under-perform the CoreShares TotalWldStock. In addition to that, African Rainbow is 3.37 times more volatile than CoreShares TotalWldStock ETF. It trades about -0.1 of its total potential returns per unit of risk. CoreShares TotalWldStock ETF is currently generating about 0.05 per unit of volatility. If you would invest  159,800  in CoreShares TotalWldStock ETF on December 4, 2024 and sell it today you would earn a total of  2,900  from holding CoreShares TotalWldStock ETF or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

African Rainbow Minerals  vs.  CoreShares TotalWldStock ETF

African Rainbow Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days African Rainbow Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CoreShares TotalWldStock

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CoreShares TotalWldStock ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, CoreShares TotalWldStock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with African Rainbow and CoreShares TotalWldStock

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

The idea behind African Rainbow Minerals and CoreShares TotalWldStock 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.