Correlation Between Afristrat Investment and HomeChoice Investments

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

By analyzing existing cross correlation between Afristrat Investment Holdings and HomeChoice Investments, you can compare the effects of market volatilities on Afristrat Investment and HomeChoice Investments 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 Afristrat Investment with a short position of HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afristrat Investment and HomeChoice Investments.

Diversification Opportunities for Afristrat Investment and HomeChoice Investments

0.0

Correlation Coefficient

Afristrat Investment  HomeChoice Investments

Pay attention - limited upside

The 3 months correlation between Afristrat and HomeChoice is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Afristrat Investment Holdings and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments and Afristrat Investment 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 Afristrat Investment Holdings are associated (or correlated) with HomeChoice Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeChoice Investments has no effect on the direction of Afristrat Investment i.e., Afristrat Investment and HomeChoice Investments go up and down completely randomly.

Pair Corralation between Afristrat Investment and HomeChoice Investments

If you would invest  220,000  in HomeChoice Investments on February 3, 2024 and sell it today you would earn a total of  29,900  from holding HomeChoice Investments or generate 13.59% return on investment over 90 days.

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

Afristrat Investment Holdings  vs.  HomeChoice Investments

Afristrat Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afristrat Investment Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Afristrat Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

HomeChoice Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HomeChoice Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking indicators, HomeChoice Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Afristrat Investment and HomeChoice Investments

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

The idea behind Afristrat Investment Holdings and HomeChoice Investments 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.