Correlation Between Allan Gray and Indexco Limited

Can any of the company-specific risk be diversified away by investing in both Allan Gray and Indexco Limited 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 Indexco Limited 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 Indexco Limited , you can compare the effects of market volatilities on Allan Gray and Indexco Limited 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 Indexco Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allan Gray and Indexco Limited.

Diversification Opportunities for Allan Gray and Indexco Limited

0.38

Correlation Coefficient

Allan Gray  Indexco Limited

Weak diversification

The 3 months correlation between Allan and Indexco is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Allan Gray Equity and Indexco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indexco Limited 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 Indexco Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indexco Limited has no effect on the direction of Allan Gray i.e., Allan Gray and Indexco Limited go up and down completely randomly.

Pair Corralation between Allan Gray and Indexco Limited

Assuming the 90 days trading horizon Allan Gray is expected to generate 10.43 times less return on investment than Indexco Limited. But when comparing it to its historical volatility, Allan Gray Equity is 1.65 times less risky than Indexco Limited. It trades about 0.01 of its potential returns per unit of risk. Indexco Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  423,100  in Indexco Limited on October 24, 2024 and sell it today you would earn a total of  2,800  from holding Indexco Limited or generate 0.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Allan Gray Equity  vs.  Indexco Limited

Allan Gray Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allan Gray Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong basic indicators, Allan Gray is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Indexco Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indexco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Indexco Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allan Gray and Indexco Limited

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

The idea behind Allan Gray Equity and Indexco 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.