Correlation Between Intel and Absa Group

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

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

Diversification Opportunities for Intel and Absa Group

-0.46

Correlation Coefficient

Intel  Absa Group

Very good diversification

The 3 months correlation between Intel and Absa is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Absa Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group and Intel 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 Intel are associated (or correlated) with Absa Group. 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 Intel i.e., Intel and Absa Group go up and down completely randomly.

Pair Corralation between Intel and Absa Group

Given the investment horizon of 90 days Intel is expected to under-perform the Absa Group. But the stock apears to be less risky and, when comparing its historical volatility, Intel is 1.19 times less risky than Absa Group. The stock trades about -0.34 of its potential returns per unit of risk. The Absa Group Ltd is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,835  in Absa Group Ltd on September 16, 2024 and sell it today you would earn a total of  382.00  from holding Absa Group Ltd or generate 20.82% return on investment over 90 days.

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

Intel  vs.  Absa Group Ltd

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Absa Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Absa Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intel and Absa Group

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

The idea behind Intel and Absa Group Ltd 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.