Correlation Between EMedia Holdings and Absa

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

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

Diversification Opportunities for EMedia Holdings and Absa

0.49

Correlation Coefficient

EMedia Holdings  Absa

Very weak diversification

The 3 months correlation between EMedia and Absa is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding eMedia Holdings Limited and Absa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group and EMedia Holdings 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 eMedia Holdings Limited 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 EMedia Holdings i.e., EMedia Holdings and Absa go up and down completely randomly.

Pair Corralation between EMedia Holdings and Absa

Assuming the 90 days trading horizon eMedia Holdings Limited is expected to generate 38.48 times more return on investment than Absa. However, EMedia Holdings is 38.48 times more volatile than Absa Group. It trades about 0.06 of its potential returns per unit of risk. Absa Group is currently generating about 0.03 per unit of risk. If you would invest  37,270  in eMedia Holdings Limited on September 20, 2024 and sell it today you would lose (1,270) from holding eMedia Holdings Limited or give up 3.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

eMedia Holdings Limited  vs.  Absa Group

eMedia Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eMedia Holdings Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, EMedia Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Absa Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Absa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMedia Holdings and Absa

The main advantage of trading using opposite EMedia Holdings and Absa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMedia Holdings 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 eMedia Holdings Limited 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.