Correlation Between Coronation Global and Absa Multi

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

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

Diversification Opportunities for Coronation Global and Absa Multi

0.92

Correlation Coefficient

Coronation Global  Absa Multi

Almost no diversification

The 3 months correlation between Coronation and Absa is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Global Equity and Absa Multi Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Multi Managed and Coronation Global 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 Coronation Global Equity are associated (or correlated) with Absa Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Multi Managed has no effect on the direction of Coronation Global i.e., Coronation Global and Absa Multi go up and down completely randomly.

Pair Corralation between Coronation Global and Absa Multi

Assuming the 90 days trading horizon Coronation Global Equity is expected to generate 2.84 times more return on investment than Absa Multi. However, Coronation Global is 2.84 times more volatile than Absa Multi Managed. It trades about 0.11 of its potential returns per unit of risk. Absa Multi Managed is currently generating about 0.15 per unit of risk. If you would invest  202.00  in Coronation Global Equity on September 15, 2024 and sell it today you would earn a total of  69.00  from holding Coronation Global Equity or generate 34.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

Coronation Global Equity  vs.  Absa Multi Managed

Coronation Global Equity

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Global Equity are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Coronation Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Absa Multi Managed

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Multi Managed are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Absa Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coronation Global and Absa Multi

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

The idea behind Coronation Global Equity and Absa Multi Managed 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.