Correlation Between Datatec and Firstrand

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

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

Diversification Opportunities for Datatec and Firstrand

-0.49

Correlation Coefficient

Datatec  Firstrand

Very good diversification

The 3 months correlation between Datatec and Firstrand is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Datatec and Firstrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firstrand and Datatec 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 Datatec are associated (or correlated) with Firstrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firstrand has no effect on the direction of Datatec i.e., Datatec and Firstrand go up and down completely randomly.

Pair Corralation between Datatec and Firstrand

Assuming the 90 days trading horizon Datatec is expected to generate 1.74 times more return on investment than Firstrand. However, Datatec is 1.74 times more volatile than Firstrand. It trades about 0.12 of its potential returns per unit of risk. Firstrand is currently generating about 0.01 per unit of risk. If you would invest  461,100  in Datatec on October 26, 2024 and sell it today you would earn a total of  21,300  from holding Datatec or generate 4.62% return on investment over 90 days.

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

Datatec  vs.  Firstrand

Datatec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datatec are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Datatec exhibited solid returns over the last few months and may actually be approaching a breakup point.

Firstrand

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Datatec and Firstrand

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

The idea behind Datatec and Firstrand 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.