Correlation Between Grindrod and Pepkor Holdings

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

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

Diversification Opportunities for Grindrod and Pepkor Holdings

0.13

Correlation Coefficient

Grindrod  Pepkor Holdings

Average diversification

The 3 months correlation between Grindrod and Pepkor is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Grindrod and Pepkor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepkor Holdings and Grindrod 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 Grindrod are associated (or correlated) with Pepkor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepkor Holdings has no effect on the direction of Grindrod i.e., Grindrod and Pepkor Holdings go up and down completely randomly.

Pair Corralation between Grindrod and Pepkor Holdings

Assuming the 90 days trading horizon Grindrod is expected to generate 138.34 times less return on investment than Pepkor Holdings. But when comparing it to its historical volatility, Grindrod is 69.07 times less risky than Pepkor Holdings. It trades about 0.06 of its potential returns per unit of risk. Pepkor Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  287,889  in Pepkor Holdings on December 23, 2024 and sell it today you would lose (32,389) from holding Pepkor Holdings or give up 11.25% of portfolio value over 90 days.

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

Grindrod  vs.  Pepkor Holdings

Grindrod

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grindrod are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Grindrod may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pepkor Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pepkor Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grindrod and Pepkor Holdings

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

The idea behind Grindrod and Pepkor Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.