Correlation Between SHOPRITE HDGS and Pick N

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

Diversification Opportunities for SHOPRITE HDGS and Pick N

0.39

Correlation Coefficient

SHOPRITE HDGS  Pick N

Weak diversification

The 3 months correlation between SHOPRITE and Pick is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding SHOPRITE HDGS ADR and Pick n Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pick n Pay 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 Pick N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pick n Pay has no effect on the direction of SHOPRITE HDGS i.e., SHOPRITE HDGS and Pick N go up and down completely randomly.

Pair Corralation between SHOPRITE HDGS and Pick N

Assuming the 90 days trading horizon SHOPRITE HDGS is expected to generate 3.55 times less return on investment than Pick N. But when comparing it to its historical volatility, SHOPRITE HDGS ADR is 1.9 times less risky than Pick N. It trades about 0.03 of its potential returns per unit of risk. Pick n Pay is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Pick n Pay on September 27, 2024 and sell it today you would earn a total of  29.00  from holding Pick n Pay or generate 22.66% return on investment over 90 days.

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

SHOPRITE HDGS ADR  vs.  Pick n Pay

SHOPRITE HDGS ADR

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, SHOPRITE HDGS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pick n Pay

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pick n Pay are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pick N reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHOPRITE HDGS and Pick N

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

The idea behind SHOPRITE HDGS ADR and Pick n Pay 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.