Correlation Between RCL Foods and Nedbank
Can any of the company-specific risk be diversified away by investing in both RCL Foods and Nedbank 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 RCL Foods and Nedbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCL Foods and Nedbank Group, you can compare the effects of market volatilities on RCL Foods and Nedbank 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 RCL Foods with a short position of Nedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCL Foods and Nedbank.
Diversification Opportunities for RCL Foods and Nedbank
Excellent diversification
The 3 months correlation between RCL and Nedbank is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group and RCL Foods 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 RCL Foods are associated (or correlated) with Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of RCL Foods i.e., RCL Foods and Nedbank go up and down completely randomly.
Pair Corralation between RCL Foods and Nedbank
Assuming the 90 days trading horizon RCL Foods is expected to generate 1.09 times more return on investment than Nedbank. However, RCL Foods is 1.09 times more volatile than Nedbank Group. It trades about 0.07 of its potential returns per unit of risk. Nedbank Group is currently generating about -0.04 per unit of risk. If you would invest 91,500 in RCL Foods on October 25, 2024 and sell it today you would earn a total of 5,700 from holding RCL Foods or generate 6.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
RCL Foods vs. Nedbank Group
Performance |
Timeline |
RCL Foods |
Nedbank Group |
RCL Foods and Nedbank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with RCL Foods and Nedbank
The main advantage of trading using opposite RCL Foods and Nedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods position performs unexpectedly, Nedbank 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 Nedbank will offset losses from the drop in Nedbank's long position.RCL Foods vs. Copper 360 | RCL Foods vs. Lesaka Technologies | RCL Foods vs. MC Mining | RCL Foods vs. Advtech |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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