Correlation Between Coronation Smaller and Investec Limited

Can any of the company-specific risk be diversified away by investing in both Coronation Smaller and Investec 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 Coronation Smaller and Investec Limited 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 Investec Limited NON, you can compare the effects of market volatilities on Coronation Smaller and Investec 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 Coronation Smaller with a short position of Investec Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coronation Smaller and Investec Limited.

Diversification Opportunities for Coronation Smaller and Investec Limited

-0.23

Correlation Coefficient

Coronation Smaller  Investec Limited

Very good diversification

The 3 months correlation between Coronation and Investec is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Smaller Companies and Investec Limited NON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Limited NON 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 Investec Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Limited NON has no effect on the direction of Coronation Smaller i.e., Coronation Smaller and Investec Limited go up and down completely randomly.

Pair Corralation between Coronation Smaller and Investec Limited

Assuming the 90 days trading horizon Coronation Smaller Companies is expected to under-perform the Investec Limited. But the fund apears to be less risky and, when comparing its historical volatility, Coronation Smaller Companies is 1.19 times less risky than Investec Limited. The fund trades about -0.2 of its potential returns per unit of risk. The Investec Limited NON is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  915,000  in Investec Limited NON on December 2, 2024 and sell it today you would earn a total of  22,500  from holding Investec Limited NON or generate 2.46% return on investment over 90 days.

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

Coronation Smaller Companies  vs.  Investec Limited NON

Coronation Smaller

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coronation Smaller Companies has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the fund traders.

Investec Limited NON

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Limited NON are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Investec Limited is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coronation Smaller and Investec Limited

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

The idea behind Coronation Smaller Companies and Investec Limited NON 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.