Correlation Between Shoprite Holdings and Aeon

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

Diversification Opportunities for Shoprite Holdings and Aeon

-0.41

Correlation Coefficient

Shoprite Holdings  Aeon

Very good diversification

The 3 months correlation between Shoprite and Aeon is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Limited and Aeon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon 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 Aeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Aeon go up and down completely randomly.

Pair Corralation between Shoprite Holdings and Aeon

Assuming the 90 days horizon Shoprite Holdings Limited is expected to under-perform the Aeon. In addition to that, Shoprite Holdings is 1.38 times more volatile than Aeon Co. It trades about -0.06 of its total potential returns per unit of risk. Aeon Co is currently generating about 0.07 per unit of volatility. If you would invest  2,200  in Aeon Co on September 23, 2024 and sell it today you would earn a total of  40.00  from holding Aeon Co or generate 1.82% return on investment over 90 days.

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

Shoprite Holdings Limited  vs.  Aeon Co

Shoprite Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shoprite Holdings Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shoprite Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Aeon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Co 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.

Pair Trading with Shoprite Holdings and Aeon

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

The idea behind Shoprite Holdings Limited and Aeon Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.