Correlation Between CFG BANK and BANK OF AFRICA

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

By analyzing existing cross correlation between CFG BANK and BANK OF AFRICA, you can compare the effects of market volatilities on CFG BANK and BANK OF AFRICA 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 CFG BANK with a short position of BANK OF AFRICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CFG BANK and BANK OF AFRICA.

Diversification Opportunities for CFG BANK and BANK OF AFRICA

0.72

Correlation Coefficient

CFG BANK  BANK OF AFRICA

Poor diversification

The 3 months correlation between CFG and BANK is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CFG BANK and BANK OF AFRICA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF AFRICA and CFG BANK 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 CFG BANK are associated (or correlated) with BANK OF AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF AFRICA has no effect on the direction of CFG BANK i.e., CFG BANK and BANK OF AFRICA go up and down completely randomly.

Pair Corralation between CFG BANK and BANK OF AFRICA

Assuming the 90 days trading horizon CFG BANK is expected to generate 1.87 times more return on investment than BANK OF AFRICA. However, CFG BANK is 1.87 times more volatile than BANK OF AFRICA. It trades about 0.19 of its potential returns per unit of risk. BANK OF AFRICA is currently generating about 0.01 per unit of risk. If you would invest  17,610  in CFG BANK on September 12, 2024 and sell it today you would earn a total of  3,400  from holding CFG BANK or generate 19.31% return on investment over 90 days.

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

CFG BANK  vs.  BANK OF AFRICA

CFG BANK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CFG BANK are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, CFG BANK displayed solid returns over the last few months and may actually be approaching a breakup point.

BANK OF AFRICA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BANK OF AFRICA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BANK OF AFRICA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CFG BANK and BANK OF AFRICA

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

The idea behind CFG BANK and BANK OF AFRICA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.