Correlation Between Coronation Capital and Coronation Equity

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

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

Diversification Opportunities for Coronation Capital and Coronation Equity

0.98

Correlation Coefficient

Coronation Capital  Coronation Equity

Almost no diversification

The 3 months correlation between Coronation and Coronation is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Capital Plus and Coronation Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Equity and Coronation Capital 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 Capital Plus are associated (or correlated) with Coronation Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Equity has no effect on the direction of Coronation Capital i.e., Coronation Capital and Coronation Equity go up and down completely randomly.

Pair Corralation between Coronation Capital and Coronation Equity

Assuming the 90 days trading horizon Coronation Capital is expected to generate 2.5 times less return on investment than Coronation Equity. But when comparing it to its historical volatility, Coronation Capital Plus is 1.57 times less risky than Coronation Equity. It trades about 0.4 of its potential returns per unit of risk. Coronation Equity is currently generating about 0.64 of returns per unit of risk over similar time horizon. If you would invest  27,126  in Coronation Equity on September 17, 2024 and sell it today you would earn a total of  1,944  from holding Coronation Equity or generate 7.17% return on investment over 90 days.

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

Coronation Capital Plus  vs.  Coronation Equity

Coronation Capital Plus

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Capital Plus are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Coronation Capital is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Coronation Equity

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Equity are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly inconsistent basic indicators, Coronation Equity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coronation Capital and Coronation Equity

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

The idea behind Coronation Capital Plus and Coronation 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..