Correlation Between Nampak and Avi

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Can any of the company-specific risk be diversified away by investing in both Nampak and Avi 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 Nampak and Avi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nampak and Avi, you can compare the effects of market volatilities on Nampak and Avi 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 Nampak with a short position of Avi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nampak and Avi.

Diversification Opportunities for Nampak and Avi

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Nampak and Avi is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nampak and Avi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avi and Nampak 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 Nampak are associated (or correlated) with Avi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avi has no effect on the direction of Nampak i.e., Nampak and Avi go up and down completely randomly.

Pair Corralation between Nampak and Avi

Assuming the 90 days trading horizon Nampak is expected to generate 2.52 times more return on investment than Avi. However, Nampak is 2.52 times more volatile than Avi. It trades about 0.13 of its potential returns per unit of risk. Avi is currently generating about 0.11 per unit of risk. If you would invest  2,604,200  in Nampak on September 24, 2024 and sell it today you would earn a total of  1,460,300  from holding Nampak or generate 56.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Nampak  vs.  Avi

 Performance 
       Timeline  
Nampak 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nampak 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.
Avi 

Risk-Adjusted Performance

0 of 100

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

Nampak and Avi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nampak and Avi

The main advantage of trading using opposite Nampak and Avi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nampak position performs unexpectedly, Avi 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 Avi will offset losses from the drop in Avi's long position.
The idea behind Nampak and Avi 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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