Correlation Between Deneb Investments and Nampak

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

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

Diversification Opportunities for Deneb Investments and Nampak

0.72

Correlation Coefficient

Deneb Investments  Nampak

Poor diversification

The 3 months correlation between Deneb and Nampak is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Deneb Investments and Nampak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nampak and Deneb Investments 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 Deneb Investments are associated (or correlated) with Nampak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nampak has no effect on the direction of Deneb Investments i.e., Deneb Investments and Nampak go up and down completely randomly.

Pair Corralation between Deneb Investments and Nampak

Assuming the 90 days trading horizon Deneb Investments is expected to under-perform the Nampak. But the stock apears to be less risky and, when comparing its historical volatility, Deneb Investments is 1.36 times less risky than Nampak. The stock trades about -0.39 of its potential returns per unit of risk. The Nampak is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,579,300  in Nampak on September 26, 2024 and sell it today you would lose (437,000) from holding Nampak or give up 9.54% of portfolio value over 90 days.

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

Deneb Investments  vs.  Nampak

Deneb Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deneb Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nampak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nampak has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Deneb Investments and Nampak

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

The idea behind Deneb Investments and Nampak 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.