Correlation Between AFREXIMBANK and ABC BANKING

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

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

Diversification Opportunities for AFREXIMBANK and ABC BANKING

-0.34

Correlation Coefficient

AFREXIMBANK  ABC BANKING

Very good diversification

The 3 months correlation between AFREXIMBANK and ABC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding AFREXIMBANK and ABC BANKING PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC BANKING PORATION and AFREXIMBANK 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 AFREXIMBANK are associated (or correlated) with ABC BANKING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC BANKING PORATION has no effect on the direction of AFREXIMBANK i.e., AFREXIMBANK and ABC BANKING go up and down completely randomly.

Pair Corralation between AFREXIMBANK and ABC BANKING

Assuming the 90 days trading horizon AFREXIMBANK is expected to under-perform the ABC BANKING. But the stock apears to be less risky and, when comparing its historical volatility, AFREXIMBANK is 26.59 times less risky than ABC BANKING. The stock trades about -0.07 of its potential returns per unit of risk. The ABC BANKING PORATION is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,940  in ABC BANKING PORATION on September 5, 2024 and sell it today you would earn a total of  60.00  from holding ABC BANKING PORATION or generate 3.09% return on investment over 90 days.

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

AFREXIMBANK  vs.  ABC BANKING PORATION

AFREXIMBANK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFREXIMBANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AFREXIMBANK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ABC BANKING PORATION

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABC BANKING PORATION are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ABC BANKING is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AFREXIMBANK and ABC BANKING

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

The idea behind AFREXIMBANK and ABC BANKING PORATION 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.