Correlation Between SOGECLAIR and SHOPRITE HLDG

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

By analyzing existing cross correlation between SOGECLAIR SA INH and SHOPRITE HLDG, you can compare the effects of market volatilities on SOGECLAIR and SHOPRITE HLDG 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 SOGECLAIR with a short position of SHOPRITE HLDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOGECLAIR and SHOPRITE HLDG.

Diversification Opportunities for SOGECLAIR and SHOPRITE HLDG

-0.27

Correlation Coefficient

SOGECLAIR  SHOPRITE HLDG

Very good diversification

The 3 months correlation between SOGECLAIR and SHOPRITE is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding SOGECLAIR SA INH and SHOPRITE HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHOPRITE HLDG and SOGECLAIR 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 SOGECLAIR SA INH are associated (or correlated) with SHOPRITE HLDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHOPRITE HLDG has no effect on the direction of SOGECLAIR i.e., SOGECLAIR and SHOPRITE HLDG go up and down completely randomly.

Pair Corralation between SOGECLAIR and SHOPRITE HLDG

Assuming the 90 days horizon SOGECLAIR SA INH is expected to generate 1.94 times more return on investment than SHOPRITE HLDG. However, SOGECLAIR is 1.94 times more volatile than SHOPRITE HLDG. It trades about 0.07 of its potential returns per unit of risk. SHOPRITE HLDG is currently generating about 0.04 per unit of risk. If you would invest  1,685  in SOGECLAIR SA INH on October 24, 2024 and sell it today you would earn a total of  175.00  from holding SOGECLAIR SA INH or generate 10.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

SOGECLAIR SA INH  vs.  SHOPRITE HLDG

SOGECLAIR SA INH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SOGECLAIR SA INH are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SOGECLAIR reported solid returns over the last few months and may actually be approaching a breakup point.

SHOPRITE HLDG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SHOPRITE HLDG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SHOPRITE HLDG is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SOGECLAIR and SHOPRITE HLDG

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

The idea behind SOGECLAIR SA INH and SHOPRITE HLDG 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 Global Correlations module to find global opportunities by holding instruments from different markets.