Correlation Between HomeChoice Investments and Grindrod

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

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

Diversification Opportunities for HomeChoice Investments and Grindrod

-0.56

Correlation Coefficient

HomeChoice Investments  Grindrod

Excellent diversification

The 3 months correlation between HomeChoice and Grindrod is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Grindrod in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grindrod and HomeChoice Investments 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 HomeChoice Investments are associated (or correlated) with Grindrod. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grindrod has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and Grindrod go up and down completely randomly.

Pair Corralation between HomeChoice Investments and Grindrod

Assuming the 90 days trading horizon HomeChoice Investments is expected to generate 3.16 times less return on investment than Grindrod. In addition to that, HomeChoice Investments is 1.58 times more volatile than Grindrod. It trades about 0.01 of its total potential returns per unit of risk. Grindrod is currently generating about 0.07 per unit of volatility. If you would invest  118,800  in Grindrod on December 24, 2024 and sell it today you would earn a total of  8,600  from holding Grindrod or generate 7.24% return on investment over 90 days.

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

HomeChoice Investments  vs.  Grindrod

HomeChoice Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeChoice Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, HomeChoice Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Grindrod

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grindrod are ranked lower than 5 (%) 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.

Pair Trading with HomeChoice Investments and Grindrod

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

The idea behind HomeChoice Investments and Grindrod 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.