Correlation Between Coronation Balanced and Coronation Top

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

By analyzing existing cross correlation between Coronation Balanced Plus and Coronation Top 20, you can compare the effects of market volatilities on Coronation Balanced and Coronation Top 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 Balanced with a short position of Coronation Top. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coronation Balanced and Coronation Top.

Diversification Opportunities for Coronation Balanced and Coronation Top

0.85

Correlation Coefficient

Coronation Balanced  Coronation Top

Very poor diversification

The 3 months correlation between Coronation and Coronation is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Balanced Plus and Coronation Top 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Top 20 and Coronation Balanced 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 Balanced Plus are associated (or correlated) with Coronation Top. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Top 20 has no effect on the direction of Coronation Balanced i.e., Coronation Balanced and Coronation Top go up and down completely randomly.

Pair Corralation between Coronation Balanced and Coronation Top

Assuming the 90 days trading horizon Coronation Balanced is expected to generate 1.26 times less return on investment than Coronation Top. But when comparing it to its historical volatility, Coronation Balanced Plus is 1.65 times less risky than Coronation Top. It trades about 0.09 of its potential returns per unit of risk. Coronation Top 20 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  21,588  in Coronation Top 20 on December 5, 2024 and sell it today you would earn a total of  587.00  from holding Coronation Top 20 or generate 2.72% return on investment over 90 days.

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

Coronation Balanced Plus  vs.  Coronation Top 20

Coronation Balanced Plus

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Balanced Plus are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Coronation Balanced is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Coronation Top 20

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coronation Top 20 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Coronation Top is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coronation Balanced and Coronation Top

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

The idea behind Coronation Balanced Plus and Coronation Top 20 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..