Correlation Between We Buy and Adcorp
Can any of the company-specific risk be diversified away by investing in both We Buy and Adcorp 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 We Buy and Adcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between We Buy Cars and Adcorp, you can compare the effects of market volatilities on We Buy and Adcorp 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 We Buy with a short position of Adcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of We Buy and Adcorp.
Diversification Opportunities for We Buy and Adcorp
Very good diversification
The 3 months correlation between WBC and Adcorp is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding We Buy Cars and Adcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adcorp and We Buy 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 We Buy Cars are associated (or correlated) with Adcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adcorp has no effect on the direction of We Buy i.e., We Buy and Adcorp go up and down completely randomly.
Pair Corralation between We Buy and Adcorp
Assuming the 90 days trading horizon We Buy Cars is expected to generate 0.54 times more return on investment than Adcorp. However, We Buy Cars is 1.86 times less risky than Adcorp. It trades about 0.25 of its potential returns per unit of risk. Adcorp is currently generating about 0.03 per unit of risk. If you would invest 190,757 in We Buy Cars on September 24, 2024 and sell it today you would earn a total of 239,343 from holding We Buy Cars or generate 125.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
We Buy Cars vs. Adcorp
Performance |
Timeline |
We Buy Cars |
Adcorp |
We Buy and Adcorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with We Buy and Adcorp
The main advantage of trading using opposite We Buy and Adcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if We Buy position performs unexpectedly, Adcorp 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 Adcorp will offset losses from the drop in Adcorp's long position.We Buy vs. E Media Holdings | We Buy vs. Bytes Technology | We Buy vs. Harmony Gold Mining | We Buy vs. African Media Entertainment |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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