Correlation Between Shoprite Holdings and Japan Asia

Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings and Japan Asia 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 Japan Asia 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 Japan Asia Investment, you can compare the effects of market volatilities on Shoprite Holdings and Japan Asia 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 Japan Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and Japan Asia.

Diversification Opportunities for Shoprite Holdings and Japan Asia

-0.79

Correlation Coefficient

Shoprite Holdings  Japan Asia

Pay attention - limited upside

The 3 months correlation between Shoprite and Japan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Limited and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment 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 Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Japan Asia go up and down completely randomly.

Pair Corralation between Shoprite Holdings and Japan Asia

Assuming the 90 days horizon Shoprite Holdings Limited is expected to under-perform the Japan Asia. But the stock apears to be less risky and, when comparing its historical volatility, Shoprite Holdings Limited is 1.76 times less risky than Japan Asia. The stock trades about -0.09 of its potential returns per unit of risk. The Japan Asia Investment is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Japan Asia Investment on December 29, 2024 and sell it today you would earn a total of  50.00  from holding Japan Asia Investment or generate 39.06% return on investment over 90 days.

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

Shoprite Holdings Limited  vs.  Japan Asia Investment

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.

Japan Asia Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Asia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shoprite Holdings and Japan Asia

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

The idea behind Shoprite Holdings Limited and Japan Asia Investment 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.