Correlation Between Absa Group and Andover Bancorp

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

By analyzing existing cross correlation between Absa Group Limited and Andover Bancorp, you can compare the effects of market volatilities on Absa Group and Andover Bancorp 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 Group with a short position of Andover Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Group and Andover Bancorp.

Diversification Opportunities for Absa Group and Andover Bancorp

0.34

Correlation Coefficient

Absa Group  Andover Bancorp

Weak diversification

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

Pair Corralation between Absa Group and Andover Bancorp

Assuming the 90 days horizon Absa Group is expected to generate 1.73 times less return on investment than Andover Bancorp. But when comparing it to its historical volatility, Absa Group Limited is 5.36 times less risky than Andover Bancorp. It trades about 0.13 of its potential returns per unit of risk. Andover Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,900  in Andover Bancorp on September 4, 2024 and sell it today you would earn a total of  100.00  from holding Andover Bancorp or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Absa Group Limited  vs.  Andover Bancorp

Absa Group Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Absa Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Andover Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Andover Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Andover Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Absa Group and Andover Bancorp

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

The idea behind Absa Group Limited and Andover Bancorp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.