Correlation Between EMedia Holdings and Nedbank

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

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

Diversification Opportunities for EMedia Holdings and Nedbank

-0.4

Correlation Coefficient

EMedia Holdings  Nedbank

Very good diversification

The 3 months correlation between EMedia and Nedbank is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding eMedia Holdings Limited and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group and EMedia Holdings 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 eMedia Holdings Limited are associated (or correlated) with Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of EMedia Holdings i.e., EMedia Holdings and Nedbank go up and down completely randomly.

Pair Corralation between EMedia Holdings and Nedbank

Assuming the 90 days trading horizon eMedia Holdings Limited is expected to generate 2.04 times more return on investment than Nedbank. However, EMedia Holdings is 2.04 times more volatile than Nedbank Group. It trades about -0.01 of its potential returns per unit of risk. Nedbank Group is currently generating about -0.04 per unit of risk. If you would invest  34,600  in eMedia Holdings Limited on October 25, 2024 and sell it today you would lose (1,600) from holding eMedia Holdings Limited or give up 4.62% of portfolio value over 90 days.

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

eMedia Holdings Limited  vs.  Nedbank Group

eMedia Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EMedia Holdings and Nedbank

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

The idea behind eMedia Holdings Limited and Nedbank Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..