Correlation Between Datatec and Tsogo Sun

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

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

Diversification Opportunities for Datatec and Tsogo Sun

-0.84

Correlation Coefficient

Datatec  Tsogo Sun

Pay attention - limited upside

The 3 months correlation between Datatec and Tsogo is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Datatec and Tsogo Sun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsogo Sun 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 Tsogo Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsogo Sun has no effect on the direction of Datatec i.e., Datatec and Tsogo Sun go up and down completely randomly.

Pair Corralation between Datatec and Tsogo Sun

Assuming the 90 days trading horizon Datatec is expected to generate 1.24 times more return on investment than Tsogo Sun. However, Datatec is 1.24 times more volatile than Tsogo Sun. It trades about 0.22 of its potential returns per unit of risk. Tsogo Sun is currently generating about -0.27 per unit of risk. If you would invest  396,800  in Datatec on September 25, 2024 and sell it today you would earn a total of  49,100  from holding Datatec or generate 12.37% return on investment over 90 days.

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

Datatec  vs.  Tsogo Sun

Datatec

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datatec are ranked lower than 12 (%) 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.

Tsogo Sun

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Datatec and Tsogo Sun

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

The idea behind Datatec and Tsogo Sun 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.