Correlation Between African Rainbow and Jubilee Platinum

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

Diversification Opportunities for African Rainbow and Jubilee Platinum

-0.25

Correlation Coefficient

African Rainbow  Jubilee Platinum

Very good diversification

The 3 months correlation between African and Jubilee is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Minerals and Jubilee Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilee Platinum 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 Jubilee Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilee Platinum has no effect on the direction of African Rainbow i.e., African Rainbow and Jubilee Platinum go up and down completely randomly.

Pair Corralation between African Rainbow and Jubilee Platinum

Assuming the 90 days trading horizon African Rainbow Minerals is expected to generate 0.84 times more return on investment than Jubilee Platinum. However, African Rainbow Minerals is 1.2 times less risky than Jubilee Platinum. It trades about -0.05 of its potential returns per unit of risk. Jubilee Platinum is currently generating about -0.08 per unit of risk. If you would invest  1,774,300  in African Rainbow Minerals on September 14, 2024 and sell it today you would lose (152,400) from holding African Rainbow Minerals or give up 8.59% of portfolio value over 90 days.

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

African Rainbow Minerals  vs.  Jubilee Platinum

African Rainbow Minerals

Risk-Adjusted Performance

0 of 100

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Jubilee Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jubilee Platinum 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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with African Rainbow and Jubilee Platinum

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

The idea behind African Rainbow Minerals and Jubilee Platinum 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.