Correlation Between SHOPRITE HDGS and Marks

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

Diversification Opportunities for SHOPRITE HDGS and Marks

0.37

Correlation Coefficient

SHOPRITE HDGS  Marks

Weak diversification

The 3 months correlation between SHOPRITE and Marks is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding SHOPRITE HDGS ADR and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of SHOPRITE HDGS i.e., SHOPRITE HDGS and Marks go up and down completely randomly.

Pair Corralation between SHOPRITE HDGS and Marks

Assuming the 90 days trading horizon SHOPRITE HDGS ADR is expected to under-perform the Marks. But the stock apears to be less risky and, when comparing its historical volatility, SHOPRITE HDGS ADR is 1.53 times less risky than Marks. The stock trades about -0.12 of its potential returns per unit of risk. The Marks and Spencer is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  463.00  in Marks and Spencer on December 27, 2024 and sell it today you would lose (63.00) from holding Marks and Spencer or give up 13.61% of portfolio value over 90 days.

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

SHOPRITE HDGS ADR  vs.  Marks and Spencer

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.

Marks and Spencer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marks and Spencer 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 HDGS and Marks

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

The idea behind SHOPRITE HDGS ADR and Marks and Spencer 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.