Correlation Between ECONET WIRELESS and STAR AFRICA

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

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

Diversification Opportunities for ECONET WIRELESS and STAR AFRICA

0.69

Correlation Coefficient

ECONET WIRELESS  STAR AFRICA

Poor diversification

The 3 months correlation between ECONET and STAR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ECONET WIRELESS HOLDINGS and STAR AFRICA PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAR AFRICA PORATION and ECONET WIRELESS 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 ECONET WIRELESS HOLDINGS are associated (or correlated) with STAR AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAR AFRICA PORATION has no effect on the direction of ECONET WIRELESS i.e., ECONET WIRELESS and STAR AFRICA go up and down completely randomly.

Pair Corralation between ECONET WIRELESS and STAR AFRICA

Assuming the 90 days trading horizon ECONET WIRELESS is expected to generate 3.56 times less return on investment than STAR AFRICA. But when comparing it to its historical volatility, ECONET WIRELESS HOLDINGS is 1.67 times less risky than STAR AFRICA. It trades about 0.08 of its potential returns per unit of risk. STAR AFRICA PORATION is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  220.00  in STAR AFRICA PORATION on December 21, 2024 and sell it today you would earn a total of  180.00  from holding STAR AFRICA PORATION or generate 81.82% return on investment over 90 days.

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

ECONET WIRELESS HOLDINGS  vs.  STAR AFRICA PORATION

ECONET WIRELESS HOLDINGS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECONET WIRELESS HOLDINGS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, ECONET WIRELESS demonstrated solid returns over the last few months and may actually be approaching a breakup point.

STAR AFRICA PORATION

Risk-Adjusted Performance

Good

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

Pair Trading with ECONET WIRELESS and STAR AFRICA

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

The idea behind ECONET WIRELESS HOLDINGS and STAR AFRICA PORATION 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.