Correlation Between Coreshares Index and Investec PLC

Can any of the company-specific risk be diversified away by investing in both Coreshares Index and Investec PLC 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 Investec PLC 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 Investec PLC, you can compare the effects of market volatilities on Coreshares Index and Investec PLC 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 Investec PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coreshares Index and Investec PLC.

Diversification Opportunities for Coreshares Index and Investec PLC

0.25

Correlation Coefficient

Coreshares Index  Investec PLC

Modest diversification

The 3 months correlation between Coreshares and Investec is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Coreshares Index Tracker and Investec PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec PLC 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 Investec PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec PLC has no effect on the direction of Coreshares Index i.e., Coreshares Index and Investec PLC go up and down completely randomly.

Pair Corralation between Coreshares Index and Investec PLC

Assuming the 90 days trading horizon Coreshares Index Tracker is expected to generate 0.66 times more return on investment than Investec PLC. However, Coreshares Index Tracker is 1.52 times less risky than Investec PLC. It trades about 0.03 of its potential returns per unit of risk. Investec PLC is currently generating about -0.07 per unit of risk. If you would invest  111,161  in Coreshares Index Tracker on December 27, 2024 and sell it today you would earn a total of  1,339  from holding Coreshares Index Tracker or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Coreshares Index Tracker  vs.  Investec PLC

Coreshares Index Tracker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coreshares Index Tracker are ranked lower than 2 (%) 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.

Investec PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Investec PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investec PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Coreshares Index and Investec PLC

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

The idea behind Coreshares Index Tracker and Investec PLC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.