Correlation Between Pan African and Afine Investments

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

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

Diversification Opportunities for Pan African and Afine Investments

-0.12

Correlation Coefficient

Pan African  Afine Investments

Good diversification

The 3 months correlation between Pan and Afine is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pan African Resources and Afine Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afine Investments and Pan African 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 Pan African Resources are associated (or correlated) with Afine Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afine Investments has no effect on the direction of Pan African i.e., Pan African and Afine Investments go up and down completely randomly.

Pair Corralation between Pan African and Afine Investments

Assuming the 90 days trading horizon Pan African Resources is expected to generate 2.57 times more return on investment than Afine Investments. However, Pan African is 2.57 times more volatile than Afine Investments. It trades about 0.16 of its potential returns per unit of risk. Afine Investments is currently generating about -0.05 per unit of risk. If you would invest  78,900  in Pan African Resources on December 29, 2024 and sell it today you would earn a total of  25,100  from holding Pan African Resources or generate 31.81% return on investment over 90 days.

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

Pan African Resources  vs.  Afine Investments

Pan African Resources

Risk-Adjusted Performance

Good

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

Afine Investments

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Pan African and Afine Investments

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

The idea behind Pan African Resources and Afine Investments 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.