Correlation Between Growthpoint Properties and JSE

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

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

Diversification Opportunities for Growthpoint Properties and JSE

0.54

Correlation Coefficient

Growthpoint Properties  JSE

Very weak diversification

The 3 months correlation between Growthpoint and JSE is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Growthpoint Properties and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited and Growthpoint Properties 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 Growthpoint Properties are associated (or correlated) with JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of Growthpoint Properties i.e., Growthpoint Properties and JSE go up and down completely randomly.

Pair Corralation between Growthpoint Properties and JSE

Assuming the 90 days trading horizon Growthpoint Properties is expected to generate 2.39 times less return on investment than JSE. But when comparing it to its historical volatility, Growthpoint Properties is 1.01 times less risky than JSE. It trades about 0.03 of its potential returns per unit of risk. JSE Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,207,200  in JSE Limited on December 31, 2024 and sell it today you would earn a total of  59,400  from holding JSE Limited or generate 4.92% return on investment over 90 days.

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

Growthpoint Properties  vs.  JSE Limited

Growthpoint Properties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Growthpoint Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Growthpoint Properties is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

JSE Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, JSE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Growthpoint Properties and JSE

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

The idea behind Growthpoint Properties and JSE Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.