Correlation Between Absa Multi and Coronation Industrial

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

By analyzing existing cross correlation between Absa Multi managed Absolute and Coronation Industrial, you can compare the effects of market volatilities on Absa Multi and Coronation Industrial 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 Absa Multi with a short position of Coronation Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Multi and Coronation Industrial.

Diversification Opportunities for Absa Multi and Coronation Industrial

0.57

Correlation Coefficient

Absa Multi  Coronation Industrial

Very weak diversification

The 3 months correlation between Absa and Coronation is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Absa Multi managed Absolute and Coronation Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Industrial and Absa Multi 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 Absa Multi managed Absolute are associated (or correlated) with Coronation Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Industrial has no effect on the direction of Absa Multi i.e., Absa Multi and Coronation Industrial go up and down completely randomly.

Pair Corralation between Absa Multi and Coronation Industrial

Assuming the 90 days trading horizon Absa Multi is expected to generate 3.54 times less return on investment than Coronation Industrial. But when comparing it to its historical volatility, Absa Multi managed Absolute is 3.04 times less risky than Coronation Industrial. It trades about 0.14 of its potential returns per unit of risk. Coronation Industrial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  27,050  in Coronation Industrial on September 13, 2024 and sell it today you would earn a total of  2,606  from holding Coronation Industrial or generate 9.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Absa Multi managed Absolute  vs.  Coronation Industrial

Absa Multi managed

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Multi managed Absolute are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Absa Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Coronation Industrial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Industrial are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly weak basic indicators, Coronation Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Absa Multi and Coronation Industrial

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

The idea behind Absa Multi managed Absolute and Coronation Industrial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.