Correlation Between African Rainbow and AfroCentric Investment
Can any of the company-specific risk be diversified away by investing in both African Rainbow and AfroCentric Investment 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 African Rainbow and AfroCentric Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Rainbow Capital and AfroCentric Investment Corp, you can compare the effects of market volatilities on African Rainbow and AfroCentric Investment 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 African Rainbow with a short position of AfroCentric Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Rainbow and AfroCentric Investment.
Diversification Opportunities for African Rainbow and AfroCentric Investment
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between African and AfroCentric is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding African Rainbow Capital and AfroCentric Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfroCentric Investment and African Rainbow 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 African Rainbow Capital are associated (or correlated) with AfroCentric Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfroCentric Investment has no effect on the direction of African Rainbow i.e., African Rainbow and AfroCentric Investment go up and down completely randomly.
Pair Corralation between African Rainbow and AfroCentric Investment
Assuming the 90 days trading horizon African Rainbow Capital is expected to generate 0.46 times more return on investment than AfroCentric Investment. However, African Rainbow Capital is 2.18 times less risky than AfroCentric Investment. It trades about 0.09 of its potential returns per unit of risk. AfroCentric Investment Corp is currently generating about -0.03 per unit of risk. If you would invest 60,000 in African Rainbow Capital on September 15, 2024 and sell it today you would earn a total of 15,000 from holding African Rainbow Capital or generate 25.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 99.22% |
Values | Daily Returns |
African Rainbow Capital vs. AfroCentric Investment Corp
Performance |
Timeline |
African Rainbow Capital |
AfroCentric Investment |
African Rainbow and AfroCentric Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with African Rainbow and AfroCentric Investment
The main advantage of trading using opposite African Rainbow and AfroCentric Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Rainbow position performs unexpectedly, AfroCentric Investment 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 AfroCentric Investment will offset losses from the drop in AfroCentric Investment's long position.African Rainbow vs. AfroCentric Investment Corp | African Rainbow vs. Brimstone Investment | African Rainbow vs. MC Mining | African Rainbow vs. Blue Label Telecoms |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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