Correlation Between BOC Aviation and African Discovery

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

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

Diversification Opportunities for BOC Aviation and African Discovery

0.64

Correlation Coefficient

BOC Aviation  African Discovery

Poor diversification

The 3 months correlation between BOC and African is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BOC Aviation Limited and African Discovery Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Discovery and BOC Aviation 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 BOC Aviation Limited are associated (or correlated) with African Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Discovery has no effect on the direction of BOC Aviation i.e., BOC Aviation and African Discovery go up and down completely randomly.

Pair Corralation between BOC Aviation and African Discovery

Assuming the 90 days horizon BOC Aviation Limited is expected to generate 0.55 times more return on investment than African Discovery. However, BOC Aviation Limited is 1.81 times less risky than African Discovery. It trades about -0.1 of its potential returns per unit of risk. African Discovery Group is currently generating about -0.17 per unit of risk. If you would invest  888.00  in BOC Aviation Limited on September 2, 2024 and sell it today you would lose (153.00) from holding BOC Aviation Limited or give up 17.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

BOC Aviation Limited  vs.  African Discovery Group

BOC Aviation Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOC Aviation Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

African Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days African Discovery Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BOC Aviation and African Discovery

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

The idea behind BOC Aviation Limited and African Discovery Group 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.