Correlation Between Coreshares Index and Coronation Equity

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

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

Diversification Opportunities for Coreshares Index and Coronation Equity

0.2

Correlation Coefficient

Coreshares Index  Coronation Equity

Modest diversification

The 3 months correlation between Coreshares and Coronation is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Coreshares Index Tracker and Coronation Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Equity and Coreshares Index 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 Coreshares Index Tracker 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 Coreshares Index i.e., Coreshares Index and Coronation Equity go up and down completely randomly.

Pair Corralation between Coreshares Index and Coronation Equity

Assuming the 90 days trading horizon Coreshares Index is expected to generate 3.97 times less return on investment than Coronation Equity. In addition to that, Coreshares Index is 1.61 times more volatile than Coronation Equity. It trades about 0.06 of its total potential returns per unit of risk. Coronation Equity is currently generating about 0.38 per unit of volatility. If you would invest  25,110  in Coronation Equity on September 17, 2024 and sell it today you would earn a total of  3,960  from holding Coronation Equity or generate 15.77% return on investment over 90 days.

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

Coreshares Index Tracker  vs.  Coronation Equity

Coreshares Index Tracker

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coreshares Index Tracker are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Coreshares Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Coreshares Index and Coronation Equity

The main advantage of trading using opposite Coreshares Index and Coronation Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coreshares Index 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 Coreshares Index Tracker 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.