Correlation Between Investec and Pepkor Holdings

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

By analyzing existing cross correlation between Investec and Pepkor Holdings, you can compare the effects of market volatilities on Investec and Pepkor Holdings 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 Investec with a short position of Pepkor Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec and Pepkor Holdings.

Diversification Opportunities for Investec and Pepkor Holdings

-0.14

Correlation Coefficient

Investec  Pepkor Holdings

Good diversification

The 3 months correlation between Investec and Pepkor is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Investec and Pepkor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepkor Holdings and Investec 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 Investec are associated (or correlated) with Pepkor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepkor Holdings has no effect on the direction of Investec i.e., Investec and Pepkor Holdings go up and down completely randomly.

Pair Corralation between Investec and Pepkor Holdings

Assuming the 90 days trading horizon Investec is expected to under-perform the Pepkor Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Investec is 100.25 times less risky than Pepkor Holdings. The stock trades about -0.13 of its potential returns per unit of risk. The Pepkor Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  226,718  in Pepkor Holdings on October 26, 2024 and sell it today you would earn a total of  34,882  from holding Pepkor Holdings or generate 15.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Investec  vs.  Pepkor Holdings

Investec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pepkor Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pepkor Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investec and Pepkor Holdings

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

The idea behind Investec and Pepkor Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.