Correlation Between CA Sales and Netcare

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

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

Diversification Opportunities for CA Sales and Netcare

0.13

Correlation Coefficient

CA Sales  Netcare

Average diversification

The 3 months correlation between CAA and Netcare is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CA Sales Holdings and Netcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcare and CA Sales 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 CA Sales Holdings are associated (or correlated) with Netcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcare has no effect on the direction of CA Sales i.e., CA Sales and Netcare go up and down completely randomly.

Pair Corralation between CA Sales and Netcare

Assuming the 90 days trading horizon CA Sales Holdings is expected to generate 1.82 times more return on investment than Netcare. However, CA Sales is 1.82 times more volatile than Netcare. It trades about 0.01 of its potential returns per unit of risk. Netcare is currently generating about -0.18 per unit of risk. If you would invest  166,900  in CA Sales Holdings on December 22, 2024 and sell it today you would lose (1,100) from holding CA Sales Holdings or give up 0.66% of portfolio value over 90 days.

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

CA Sales Holdings  vs.  Netcare

CA Sales Holdings

Risk-Adjusted Performance

Very Weak

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

Netcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Netcare 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CA Sales and Netcare

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

The idea behind CA Sales Holdings and Netcare 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 Valuation module to check real value of public entities based on technical and fundamental data.