Correlation Between Wesizwe and African Rainbow

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

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

Diversification Opportunities for Wesizwe and African Rainbow

-0.05

Correlation Coefficient

Wesizwe  African Rainbow

Good diversification

The 3 months correlation between Wesizwe and African is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Wesizwe and African Rainbow Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Rainbow Minerals and Wesizwe 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 Wesizwe 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 Minerals has no effect on the direction of Wesizwe i.e., Wesizwe and African Rainbow go up and down completely randomly.

Pair Corralation between Wesizwe and African Rainbow

Assuming the 90 days trading horizon Wesizwe is expected to generate 2.59 times more return on investment than African Rainbow. However, Wesizwe is 2.59 times more volatile than African Rainbow Minerals. It trades about 0.05 of its potential returns per unit of risk. African Rainbow Minerals is currently generating about 0.02 per unit of risk. If you would invest  4,100  in Wesizwe on December 28, 2024 and sell it today you would earn a total of  400.00  from holding Wesizwe or generate 9.76% return on investment over 90 days.

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

Wesizwe  vs.  African Rainbow Minerals

Wesizwe

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wesizwe are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Wesizwe exhibited solid returns over the last few months and may actually be approaching a breakup point.

African Rainbow Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in African Rainbow Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, African Rainbow is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Wesizwe and African Rainbow

The main advantage of trading using opposite Wesizwe and African Rainbow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesizwe 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 Wesizwe and African Rainbow Minerals 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.