Correlation Between Grindrod and We Buy

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

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

Diversification Opportunities for Grindrod and We Buy

-0.88

Correlation Coefficient

Grindrod  We Buy

Pay attention - limited upside

The 3 months correlation between Grindrod and WBC is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Grindrod and We Buy Cars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on We Buy Cars 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 We Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of We Buy Cars has no effect on the direction of Grindrod i.e., Grindrod and We Buy go up and down completely randomly.

Pair Corralation between Grindrod and We Buy

Assuming the 90 days trading horizon Grindrod is expected to generate 0.81 times more return on investment than We Buy. However, Grindrod is 1.24 times less risky than We Buy. It trades about -0.09 of its potential returns per unit of risk. We Buy Cars is currently generating about -0.16 per unit of risk. If you would invest  122,900  in Grindrod on October 11, 2024 and sell it today you would lose (4,400) from holding Grindrod or give up 3.58% of portfolio value over 90 days.

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

Grindrod  vs.  We Buy Cars

Grindrod

Risk-Adjusted Performance

0 of 100

Very Weak

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

We Buy Cars

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in We Buy Cars are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, We Buy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grindrod and We Buy

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

The idea behind Grindrod and We Buy Cars 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 Transaction History module to view history of all your transactions and understand their impact on performance.