Correlation Between Icape Holding and High Co

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

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

Diversification Opportunities for Icape Holding and High Co

-0.4

Correlation Coefficient

Icape Holding  High Co

Very good diversification

The 3 months correlation between Icape and High is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Icape Holding and High Co SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Co SA and Icape Holding 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 Icape Holding are associated (or correlated) with High Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Co SA has no effect on the direction of Icape Holding i.e., Icape Holding and High Co go up and down completely randomly.

Pair Corralation between Icape Holding and High Co

Assuming the 90 days trading horizon Icape Holding is expected to under-perform the High Co. In addition to that, Icape Holding is 1.51 times more volatile than High Co SA. It trades about -0.02 of its total potential returns per unit of risk. High Co SA is currently generating about 0.21 per unit of volatility. If you would invest  235.00  in High Co SA on December 21, 2024 and sell it today you would earn a total of  79.00  from holding High Co SA or generate 33.62% return on investment over 90 days.

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

Icape Holding  vs.  High Co SA

Icape Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Icape Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Icape Holding is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

High Co SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in High Co SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, High Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Icape Holding and High Co

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

The idea behind Icape Holding and High Co SA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.