Correlation Between Renergen and African Rainbow

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Can any of the company-specific risk be diversified away by investing in both Renergen and African Rainbow 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 Renergen and African Rainbow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Renergen and African Rainbow Capital, you can compare the effects of market volatilities on Renergen and African Rainbow 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 Renergen with a short position of African Rainbow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renergen and African Rainbow.

Diversification Opportunities for Renergen and African Rainbow

-0.79
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Renergen and African is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Renergen and African Rainbow Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Rainbow Capital and Renergen 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 Renergen are associated (or correlated) with African Rainbow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Rainbow Capital has no effect on the direction of Renergen i.e., Renergen and African Rainbow go up and down completely randomly.

Pair Corralation between Renergen and African Rainbow

Assuming the 90 days trading horizon Renergen is expected to under-perform the African Rainbow. In addition to that, Renergen is 1.15 times more volatile than African Rainbow Capital. It trades about -0.16 of its total potential returns per unit of risk. African Rainbow Capital is currently generating about 0.14 per unit of volatility. If you would invest  74,200  in African Rainbow Capital on September 1, 2024 and sell it today you would earn a total of  4,800  from holding African Rainbow Capital or generate 6.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Renergen  vs.  African Rainbow Capital

 Performance 
       Timeline  
Renergen 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Renergen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
African Rainbow Capital 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in African Rainbow Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, African Rainbow exhibited solid returns over the last few months and may actually be approaching a breakup point.

Renergen and African Rainbow Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Renergen and African Rainbow

The main advantage of trading using opposite Renergen and African Rainbow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renergen position performs unexpectedly, African Rainbow 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 Rainbow will offset losses from the drop in African Rainbow's long position.
The idea behind Renergen and African Rainbow Capital 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 CEOs Directory module to screen CEOs from public companies around the world.

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