Correlation Between We Buy and MultiChoice
Can any of the company-specific risk be diversified away by investing in both We Buy and MultiChoice 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 MultiChoice 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 MultiChoice Group, you can compare the effects of market volatilities on We Buy and MultiChoice 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 MultiChoice. Check out your portfolio center. Please also check ongoing floating volatility patterns of We Buy and MultiChoice.
Diversification Opportunities for We Buy and MultiChoice
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WBC and MultiChoice is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding We Buy Cars and MultiChoice Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MultiChoice Group 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 MultiChoice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MultiChoice Group has no effect on the direction of We Buy i.e., We Buy and MultiChoice go up and down completely randomly.
Pair Corralation between We Buy and MultiChoice
Assuming the 90 days trading horizon We Buy Cars is expected to generate 7.72 times more return on investment than MultiChoice. However, We Buy is 7.72 times more volatile than MultiChoice Group. It trades about 0.04 of its potential returns per unit of risk. MultiChoice Group is currently generating about 0.09 per unit of risk. If you would invest 435,818 in We Buy Cars on September 25, 2024 and sell it today you would earn a total of 6,182 from holding We Buy Cars or generate 1.42% 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. MultiChoice Group
Performance |
Timeline |
We Buy Cars |
MultiChoice Group |
We Buy and MultiChoice Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with We Buy and MultiChoice
The main advantage of trading using opposite We Buy and MultiChoice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if We Buy position performs unexpectedly, MultiChoice 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 MultiChoice will offset losses from the drop in MultiChoice's long position.We Buy vs. Prosus NV | We Buy vs. Compagnie Financire Richemont | We Buy vs. British American Tobacco | We Buy vs. Anglo American PLC |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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