Correlation Between Sabvest Capital and African Rainbow

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

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

Diversification Opportunities for Sabvest Capital and African Rainbow

0.5

Correlation Coefficient

Sabvest Capital  African Rainbow

Very weak diversification

The 3 months correlation between Sabvest and African is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sabvest Capital and African Rainbow Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Rainbow Capital and Sabvest Capital 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 Sabvest Capital are associated (or correlated) with African Rainbow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Rainbow Capital has no effect on the direction of Sabvest Capital i.e., Sabvest Capital and African Rainbow go up and down completely randomly.

Pair Corralation between Sabvest Capital and African Rainbow

Assuming the 90 days trading horizon Sabvest Capital is expected to generate 2.76 times less return on investment than African Rainbow. But when comparing it to its historical volatility, Sabvest Capital is 1.16 times less risky than African Rainbow. It trades about 0.02 of its potential returns per unit of risk. African Rainbow Capital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  61,200  in African Rainbow Capital on September 23, 2024 and sell it today you would earn a total of  33,800  from holding African Rainbow Capital or generate 55.23% return on investment over 90 days.

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

Sabvest Capital  vs.  African Rainbow Capital

Sabvest Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sabvest Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sabvest Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

African Rainbow Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in African Rainbow Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, African Rainbow exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabvest Capital and African Rainbow

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

The idea behind Sabvest Capital and African Rainbow Capital 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.