Correlation Between Intel and Shoprite Holdings

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

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

Diversification Opportunities for Intel and Shoprite Holdings

-0.2

Correlation Coefficient

Intel  Shoprite Holdings

Good diversification

The 3 months correlation between Intel and Shoprite is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings and Intel 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 Intel are associated (or correlated) with Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of Intel i.e., Intel and Shoprite Holdings go up and down completely randomly.

Pair Corralation between Intel and Shoprite Holdings

Assuming the 90 days trading horizon Intel is expected to generate 2.16 times more return on investment than Shoprite Holdings. However, Intel is 2.16 times more volatile than Shoprite Holdings Limited. It trades about 0.01 of its potential returns per unit of risk. Shoprite Holdings Limited is currently generating about -0.07 per unit of risk. If you would invest  2,233  in Intel on November 28, 2024 and sell it today you would lose (43.00) from holding Intel or give up 1.93% of portfolio value over 90 days.

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

Intel  vs.  Shoprite Holdings Limited

Intel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Intel is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Shoprite Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoprite Holdings Limited 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 Intel and Shoprite Holdings

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

The idea behind Intel and Shoprite Holdings Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.