Correlation Between SHOPRITE HDGS and Investment Latour

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

By analyzing existing cross correlation between SHOPRITE HDGS ADR and Investment Latour AB, you can compare the effects of market volatilities on SHOPRITE HDGS and Investment Latour 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 HDGS with a short position of Investment Latour. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHOPRITE HDGS and Investment Latour.

Diversification Opportunities for SHOPRITE HDGS and Investment Latour

-0.38

Correlation Coefficient

SHOPRITE HDGS  Investment Latour

Very good diversification

The 3 months correlation between SHOPRITE and Investment is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SHOPRITE HDGS ADR and Investment Latour AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Latour and SHOPRITE HDGS 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 HDGS ADR are associated (or correlated) with Investment Latour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Latour has no effect on the direction of SHOPRITE HDGS i.e., SHOPRITE HDGS and Investment Latour go up and down completely randomly.

Pair Corralation between SHOPRITE HDGS and Investment Latour

Assuming the 90 days trading horizon SHOPRITE HDGS ADR is expected to under-perform the Investment Latour. In addition to that, SHOPRITE HDGS is 1.04 times more volatile than Investment Latour AB. It trades about -0.11 of its total potential returns per unit of risk. Investment Latour AB is currently generating about 0.1 per unit of volatility. If you would invest  2,387  in Investment Latour AB on December 25, 2024 and sell it today you would earn a total of  245.00  from holding Investment Latour AB or generate 10.26% return on investment over 90 days.

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

SHOPRITE HDGS ADR  vs.  Investment Latour AB

SHOPRITE HDGS ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHOPRITE HDGS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Investment Latour

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investment Latour AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Investment Latour may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SHOPRITE HDGS and Investment Latour

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

The idea behind SHOPRITE HDGS ADR and Investment Latour AB 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.