Correlation Between African Media and We Buy

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

By analyzing existing cross correlation between African Media Entertainment and We Buy Cars, you can compare the effects of market volatilities on African Media and We Buy 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 Media with a short position of We Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Media and We Buy.

Diversification Opportunities for African Media and We Buy

0.06

Correlation Coefficient

African Media  We Buy

Significant diversification

The 3 months correlation between African and WBC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding African Media Entertainment and We Buy Cars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on We Buy Cars and African Media 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 Media Entertainment are associated (or correlated) with We Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of We Buy Cars has no effect on the direction of African Media i.e., African Media and We Buy go up and down completely randomly.

Pair Corralation between African Media and We Buy

Assuming the 90 days trading horizon African Media is expected to generate 9.25 times less return on investment than We Buy. In addition to that, African Media is 1.5 times more volatile than We Buy Cars. It trades about 0.03 of its total potential returns per unit of risk. We Buy Cars is currently generating about 0.37 per unit of volatility. If you would invest  297,375  in We Buy Cars on September 14, 2024 and sell it today you would earn a total of  156,925  from holding We Buy Cars or generate 52.77% return on investment over 90 days.

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

African Media Entertainment  vs.  We Buy Cars

African Media Entert

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in African Media Entertainment 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, African Media is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

We Buy Cars

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in We Buy Cars are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, We Buy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with African Media and We Buy

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

The idea behind African Media Entertainment and We Buy Cars 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.