Correlation Between Firstrand and Raubex

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

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

Diversification Opportunities for Firstrand and Raubex

0.65

Correlation Coefficient

Firstrand  Raubex

Poor diversification

The 3 months correlation between Firstrand and Raubex is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Firstrand and Raubex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raubex and Firstrand 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 Firstrand are associated (or correlated) with Raubex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raubex has no effect on the direction of Firstrand i.e., Firstrand and Raubex go up and down completely randomly.

Pair Corralation between Firstrand and Raubex

Assuming the 90 days trading horizon Firstrand is expected to under-perform the Raubex. In addition to that, Firstrand is 1.07 times more volatile than Raubex. It trades about -0.02 of its total potential returns per unit of risk. Raubex is currently generating about 0.11 per unit of volatility. If you would invest  510,672  in Raubex on September 24, 2024 and sell it today you would earn a total of  14,928  from holding Raubex or generate 2.92% return on investment over 90 days.

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

Firstrand  vs.  Raubex

Firstrand

Risk-Adjusted Performance

0 of 100

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.

Raubex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raubex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Raubex is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Firstrand and Raubex

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

The idea behind Firstrand and Raubex 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.