Correlation Between Aspen Pharmacare and Reinet Investments

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

By analyzing existing cross correlation between Aspen Pharmacare Holdings and Reinet Investments SCA, you can compare the effects of market volatilities on Aspen Pharmacare and Reinet Investments 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 Aspen Pharmacare with a short position of Reinet Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Pharmacare and Reinet Investments.

Diversification Opportunities for Aspen Pharmacare and Reinet Investments

0.11

Correlation Coefficient

Aspen Pharmacare  Reinet Investments

Average diversification

The 3 months correlation between Aspen and Reinet is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Pharmacare Holdings and Reinet Investments SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinet Investments SCA and Aspen Pharmacare 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 Aspen Pharmacare Holdings are associated (or correlated) with Reinet Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinet Investments SCA has no effect on the direction of Aspen Pharmacare i.e., Aspen Pharmacare and Reinet Investments go up and down completely randomly.

Pair Corralation between Aspen Pharmacare and Reinet Investments

Assuming the 90 days trading horizon Aspen Pharmacare is expected to generate 1.4 times less return on investment than Reinet Investments. In addition to that, Aspen Pharmacare is 1.28 times more volatile than Reinet Investments SCA. It trades about 0.03 of its total potential returns per unit of risk. Reinet Investments SCA is currently generating about 0.05 per unit of volatility. If you would invest  3,347,638  in Reinet Investments SCA on October 5, 2024 and sell it today you would earn a total of  1,065,662  from holding Reinet Investments SCA or generate 31.83% return on investment over 90 days.

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

Aspen Pharmacare Holdings  vs.  Reinet Investments SCA

Aspen Pharmacare Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Pharmacare Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Reinet Investments SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aspen Pharmacare and Reinet Investments

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

The idea behind Aspen Pharmacare Holdings and Reinet Investments SCA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.