Correlation Between Shoprite Holdings and 2G ENERGY

Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings and 2G ENERGY 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 Shoprite Holdings and 2G ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shoprite Holdings Limited and 2G ENERGY , you can compare the effects of market volatilities on Shoprite Holdings and 2G ENERGY 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 Shoprite Holdings with a short position of 2G ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and 2G ENERGY.

Diversification Opportunities for Shoprite Holdings and 2G ENERGY

-0.27

Correlation Coefficient

Shoprite Holdings  2G ENERGY

Very good diversification

The 3 months correlation between Shoprite and 2GB is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Limited and 2G ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2G ENERGY and Shoprite 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 Shoprite Holdings Limited are associated (or correlated) with 2G ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2G ENERGY has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and 2G ENERGY go up and down completely randomly.

Pair Corralation between Shoprite Holdings and 2G ENERGY

Assuming the 90 days horizon Shoprite Holdings Limited is expected to under-perform the 2G ENERGY. But the stock apears to be less risky and, when comparing its historical volatility, Shoprite Holdings Limited is 2.12 times less risky than 2G ENERGY. The stock trades about -0.09 of its potential returns per unit of risk. The 2G ENERGY is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,270  in 2G ENERGY on December 29, 2024 and sell it today you would earn a total of  185.00  from holding 2G ENERGY or generate 8.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Shoprite Holdings Limited  vs.  2G ENERGY

Shoprite Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoprite Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

2G ENERGY

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 2G ENERGY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, 2G ENERGY may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shoprite Holdings and 2G ENERGY

The main advantage of trading using opposite Shoprite Holdings and 2G ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoprite Holdings position performs unexpectedly, 2G ENERGY 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 2G ENERGY will offset losses from the drop in 2G ENERGY's long position.

The idea behind Shoprite Holdings Limited and 2G ENERGY 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.