Correlation Between Aveng and Foschini

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

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

Diversification Opportunities for Aveng and Foschini

0.63

Correlation Coefficient

Aveng  Foschini

Poor diversification

The 3 months correlation between Aveng and Foschini is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and Foschini Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foschini Group and Aveng 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 Aveng are associated (or correlated) with Foschini. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foschini Group has no effect on the direction of Aveng i.e., Aveng and Foschini go up and down completely randomly.

Pair Corralation between Aveng and Foschini

Assuming the 90 days trading horizon Aveng is expected to generate 1.01 times more return on investment than Foschini. However, Aveng is 1.01 times more volatile than Foschini Group. It trades about 0.37 of its potential returns per unit of risk. Foschini Group is currently generating about 0.01 per unit of risk. If you would invest  117,500  in Aveng on October 10, 2024 and sell it today you would earn a total of  11,800  from holding Aveng or generate 10.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Aveng  vs.  Foschini Group

Aveng

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

Foschini Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Foschini Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Foschini exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aveng and Foschini

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

The idea behind Aveng and Foschini Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.