Correlation Between CA Sales and Absa

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

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

Diversification Opportunities for CA Sales and Absa

0.4

Correlation Coefficient

CA Sales  Absa

Very weak diversification

The 3 months correlation between CAA and Absa is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CA Sales Holdings and Absa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group and CA Sales 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 CA Sales Holdings are associated (or correlated) with Absa. 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 CA Sales i.e., CA Sales and Absa go up and down completely randomly.

Pair Corralation between CA Sales and Absa

Assuming the 90 days trading horizon CA Sales Holdings is expected to generate 3.61 times more return on investment than Absa. However, CA Sales is 3.61 times more volatile than Absa Group. It trades about -0.05 of its potential returns per unit of risk. Absa Group is currently generating about -0.2 per unit of risk. If you would invest  161,600  in CA Sales Holdings on October 8, 2024 and sell it today you would lose (4,800) from holding CA Sales Holdings or give up 2.97% of portfolio value over 90 days.

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

CA Sales Holdings  vs.  Absa Group

CA Sales Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CA Sales may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Absa Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Absa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CA Sales and Absa

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

The idea behind CA Sales Holdings and Absa Group 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.