Correlation Between Datatec and Pick N

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

By analyzing existing cross correlation between Datatec and Pick N Pay, you can compare the effects of market volatilities on Datatec and Pick N 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 Pick N. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datatec and Pick N.

Diversification Opportunities for Datatec and Pick N

0.02

Correlation Coefficient

Datatec  Pick N

Significant diversification

The 3 months correlation between Datatec and Pick is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Datatec and Pick N Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pick N Pay 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 Pick N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pick N Pay has no effect on the direction of Datatec i.e., Datatec and Pick N go up and down completely randomly.

Pair Corralation between Datatec and Pick N

Assuming the 90 days trading horizon Datatec is expected to generate 1.06 times more return on investment than Pick N. However, Datatec is 1.06 times more volatile than Pick N Pay. It trades about 0.13 of its potential returns per unit of risk. Pick N Pay is currently generating about -0.06 per unit of risk. If you would invest  451,300  in Datatec on December 21, 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Datatec  vs.  Pick N Pay

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.

Pick N Pay

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Datatec and Pick N

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

The idea behind Datatec and Pick N Pay 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.