Correlation Between AfricaRhodium ETF and Firstrand

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

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

Diversification Opportunities for AfricaRhodium ETF and Firstrand

-0.51

Correlation Coefficient

AfricaRhodium ETF  Firstrand

Excellent diversification

The 3 months correlation between AfricaRhodium and Firstrand is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding AfricaRhodium ETF and Firstrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firstrand and AfricaRhodium ETF 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 AfricaRhodium ETF are associated (or correlated) with Firstrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firstrand has no effect on the direction of AfricaRhodium ETF i.e., AfricaRhodium ETF and Firstrand go up and down completely randomly.

Pair Corralation between AfricaRhodium ETF and Firstrand

Assuming the 90 days trading horizon AfricaRhodium ETF is expected to generate 1.19 times more return on investment than Firstrand. However, AfricaRhodium ETF is 1.19 times more volatile than Firstrand. It trades about 0.09 of its potential returns per unit of risk. Firstrand is currently generating about -0.11 per unit of risk. If you would invest  7,585,000  in AfricaRhodium ETF on December 4, 2024 and sell it today you would earn a total of  541,000  from holding AfricaRhodium ETF or generate 7.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AfricaRhodium ETF  vs.  Firstrand

AfricaRhodium ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AfricaRhodium ETF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, AfricaRhodium ETF may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Firstrand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Firstrand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with AfricaRhodium ETF and Firstrand

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

The idea behind AfricaRhodium ETF and Firstrand 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.