Correlation Between Allan Gray and Sabvest Capital

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

By analyzing existing cross correlation between Allan Gray Equity and Sabvest Capital, you can compare the effects of market volatilities on Allan Gray and Sabvest Capital 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 Allan Gray with a short position of Sabvest Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allan Gray and Sabvest Capital.

Diversification Opportunities for Allan Gray and Sabvest Capital

0.82

Correlation Coefficient

Allan Gray  Sabvest Capital

Very poor diversification

The 3 months correlation between Allan and Sabvest is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Allan Gray Equity and Sabvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabvest Capital and Allan Gray 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 Allan Gray Equity are associated (or correlated) with Sabvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabvest Capital has no effect on the direction of Allan Gray i.e., Allan Gray and Sabvest Capital go up and down completely randomly.

Pair Corralation between Allan Gray and Sabvest Capital

Assuming the 90 days trading horizon Allan Gray is expected to generate 5.11 times less return on investment than Sabvest Capital. But when comparing it to its historical volatility, Allan Gray Equity is 5.48 times less risky than Sabvest Capital. It trades about 0.15 of its potential returns per unit of risk. Sabvest Capital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  755,000  in Sabvest Capital on September 12, 2024 and sell it today you would earn a total of  174,000  from holding Sabvest Capital or generate 23.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

Allan Gray Equity  vs.  Sabvest Capital

Allan Gray Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allan Gray Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Allan Gray is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Sabvest Capital

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabvest Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sabvest Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allan Gray and Sabvest Capital

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

The idea behind Allan Gray Equity and Sabvest 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.