Correlation Between Datatec and Investec PLC

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

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

Diversification Opportunities for Datatec and Investec PLC

-0.44

Correlation Coefficient

Datatec  Investec PLC

Very good diversification

The 3 months correlation between Datatec and Investec is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Datatec and Investec PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec PLC 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 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 Datatec i.e., Datatec and Investec PLC go up and down completely randomly.

Pair Corralation between Datatec and Investec PLC

Assuming the 90 days trading horizon Datatec is expected to generate 1.26 times more return on investment than Investec PLC. However, Datatec is 1.26 times more volatile than Investec PLC. It trades about 0.13 of its potential returns per unit of risk. Investec PLC is currently generating about -0.08 per unit of risk. If you would invest  451,300  in Datatec on December 23, 2024 and sell it today you would earn a total of  63,700  from holding Datatec or generate 14.11% 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.  Investec PLC

Datatec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Datatec are ranked lower than 10 (%) 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.

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 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 Datatec and Investec PLC

The main advantage of trading using opposite Datatec and Investec PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datatec 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 Datatec 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.