Correlation Between Coronation Smaller and Allan Gray

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

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

Diversification Opportunities for Coronation Smaller and Allan Gray

0.89

Correlation Coefficient

Coronation Smaller  Allan Gray

Very poor diversification

The 3 months correlation between Coronation and Allan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Smaller Companies and Allan Gray Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allan Gray Equity and Coronation Smaller 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 Coronation Smaller Companies are associated (or correlated) with Allan Gray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allan Gray Equity has no effect on the direction of Coronation Smaller i.e., Coronation Smaller and Allan Gray go up and down completely randomly.

Pair Corralation between Coronation Smaller and Allan Gray

Assuming the 90 days trading horizon Coronation Smaller Companies is expected to generate 1.29 times more return on investment than Allan Gray. However, Coronation Smaller is 1.29 times more volatile than Allan Gray Equity. It trades about 0.21 of its potential returns per unit of risk. Allan Gray Equity is currently generating about 0.15 per unit of risk. If you would invest  12,879  in Coronation Smaller Companies on September 12, 2024 and sell it today you would earn a total of  1,059  from holding Coronation Smaller Companies or generate 8.22% return on investment over 90 days.

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

Coronation Smaller Companies  vs.  Allan Gray Equity

Coronation Smaller

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Smaller Companies are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly weak basic indicators, Coronation Smaller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Coronation Smaller and Allan Gray

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

The idea behind Coronation Smaller Companies and Allan Gray Equity 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.