Correlation Between Credit Agricole and Absa Group

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

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

Diversification Opportunities for Credit Agricole and Absa Group

-0.03

Correlation Coefficient

Credit Agricole  Absa Group

Good diversification

The 3 months correlation between Credit and Absa is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Credit Agricole SA and Absa Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group and Credit Agricole 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 Credit Agricole SA 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 Credit Agricole i.e., Credit Agricole and Absa Group go up and down completely randomly.

Pair Corralation between Credit Agricole and Absa Group

Assuming the 90 days horizon Credit Agricole is expected to generate 1.27 times less return on investment than Absa Group. But when comparing it to its historical volatility, Credit Agricole SA is 1.95 times less risky than Absa Group. It trades about 0.09 of its potential returns per unit of risk. Absa Group Ltd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,501  in Absa Group Ltd on December 5, 2024 and sell it today you would earn a total of  459.00  from holding Absa Group Ltd or generate 30.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Credit Agricole SA  vs.  Absa Group Ltd

Credit Agricole SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Agricole SA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Credit Agricole showed solid returns over the last few months and may actually be approaching a breakup point.

Absa Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Absa Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Credit Agricole and Absa Group

The main advantage of trading using opposite Credit Agricole and Absa Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credit Agricole 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 Credit Agricole SA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.