Correlation Between Banco Del and Absa Group

Can any of the company-specific risk be diversified away by investing in both Banco Del and Absa Group 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 Banco Del and Absa Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco del Bajo and Absa Group Ltd, you can compare the effects of market volatilities on Banco Del and Absa Group 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 Banco Del with a short position of Absa Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Del and Absa Group.

Diversification Opportunities for Banco Del and Absa Group

-0.25

Correlation Coefficient

Banco Del  Absa Group

Very good diversification

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

Pair Corralation between Banco Del and Absa Group

Assuming the 90 days horizon Banco del Bajo is expected to under-perform the Absa Group. In addition to that, Banco Del is 1.65 times more volatile than Absa Group Ltd. It trades about -0.12 of its total potential returns per unit of risk. Absa Group Ltd is currently generating about 0.09 per unit of volatility. If you would invest  1,944  in Absa Group Ltd on September 17, 2024 and sell it today you would earn a total of  273.00  from holding Absa Group Ltd or generate 14.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.56%
Values	Daily Returns

Banco del Bajo  vs.  Absa Group Ltd

Banco del Bajo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco del Bajo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Absa Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Absa Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Del and Absa Group

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

The idea behind Banco del Bajo and Absa Group Ltd 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.