Correlation Between East Africa and Powell Max

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

By analyzing existing cross correlation between East Africa Metals and Powell Max Limited, you can compare the effects of market volatilities on East Africa and Powell Max 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 East Africa with a short position of Powell Max. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Powell Max.

Diversification Opportunities for East Africa and Powell Max

0.0

Correlation Coefficient

East Africa  Powell Max

Pay attention - limited upside

The 3 months correlation between East and Powell is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Powell Max Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powell Max Limited and East Africa 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 East Africa Metals are associated (or correlated) with Powell Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powell Max Limited has no effect on the direction of East Africa i.e., East Africa and Powell Max go up and down completely randomly.

Pair Corralation between East Africa and Powell Max

Assuming the 90 days horizon East Africa Metals is expected to generate 8.28 times more return on investment than Powell Max. However, East Africa is 8.28 times more volatile than Powell Max Limited. It trades about 0.09 of its potential returns per unit of risk. Powell Max Limited is currently generating about -0.2 per unit of risk. If you would invest  9.15  in East Africa Metals on October 24, 2024 and sell it today you would earn a total of  1.85  from holding East Africa Metals or generate 20.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	19.11%
Values	Daily Returns

East Africa Metals  vs.  Powell Max Limited

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, East Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Powell Max Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powell Max Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with East Africa and Powell Max

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

The idea behind East Africa Metals and Powell Max Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.