Correlation Between CAFCA and OK ZIMBABWE

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

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

Diversification Opportunities for CAFCA and OK ZIMBABWE

-0.81

Correlation Coefficient

CAFCA  OK ZIMBABWE

Pay attention - limited upside

The 3 months correlation between CAFCA and OKZ is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding CAFCA LIMITED and OK ZIMBABWE LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OK ZIMBABWE LIMITED and CAFCA 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 CAFCA LIMITED are associated (or correlated) with OK ZIMBABWE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OK ZIMBABWE LIMITED has no effect on the direction of CAFCA i.e., CAFCA and OK ZIMBABWE go up and down completely randomly.

Pair Corralation between CAFCA and OK ZIMBABWE

Assuming the 90 days trading horizon CAFCA LIMITED is expected to generate 0.59 times more return on investment than OK ZIMBABWE. However, CAFCA LIMITED is 1.71 times less risky than OK ZIMBABWE. It trades about 0.22 of its potential returns per unit of risk. OK ZIMBABWE LIMITED is currently generating about -0.12 per unit of risk. If you would invest  140,000  in CAFCA LIMITED on September 28, 2024 and sell it today you would earn a total of  65,000  from holding CAFCA LIMITED or generate 46.43% return on investment over 90 days.

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

CAFCA LIMITED  vs.  OK ZIMBABWE LIMITED

CAFCA LIMITED

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAFCA LIMITED are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, CAFCA showed solid returns over the last few months and may actually be approaching a breakup point.

OK ZIMBABWE LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OK ZIMBABWE LIMITED 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 forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CAFCA and OK ZIMBABWE

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

The idea behind CAFCA LIMITED and OK ZIMBABWE LIMITED 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.