Correlation Between Absa Multi and Coronation Balanced

Can any of the company-specific risk be diversified away by investing in both Absa Multi and Coronation Balanced 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 Balanced 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 Balanced Plus, you can compare the effects of market volatilities on Absa Multi and Coronation Balanced 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 Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Multi and Coronation Balanced.

Diversification Opportunities for Absa Multi and Coronation Balanced

0.91

Correlation Coefficient

Absa Multi  Coronation Balanced

Almost no diversification

The 3 months correlation between Absa and Coronation is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Absa Multi managed Absolute and Coronation Balanced Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Balanced Plus 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Balanced Plus has no effect on the direction of Absa Multi i.e., Absa Multi and Coronation Balanced go up and down completely randomly.

Pair Corralation between Absa Multi and Coronation Balanced

Assuming the 90 days trading horizon Absa Multi is expected to generate 3.0 times less return on investment than Coronation Balanced. But when comparing it to its historical volatility, Absa Multi managed Absolute is 1.52 times less risky than Coronation Balanced. It trades about 0.14 of its potential returns per unit of risk. Coronation Balanced Plus is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  15,167  in Coronation Balanced Plus on September 12, 2024 and sell it today you would earn a total of  1,259  from holding Coronation Balanced Plus or generate 8.3% return on investment over 90 days.

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

Absa Multi managed Absolute  vs.  Coronation Balanced Plus

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 Balanced Plus

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Balanced Plus are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly weak basic indicators, Coronation Balanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Absa Multi and Coronation Balanced

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

The idea behind Absa Multi managed Absolute and Coronation Balanced Plus 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.