Correlation Between Investec Limited and Sabvest Capital

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

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

Diversification Opportunities for Investec Limited and Sabvest Capital

0.28

Correlation Coefficient

Investec Limited  Sabvest Capital

Modest diversification

The 3 months correlation between Investec and Sabvest is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Investec Limited NON and Sabvest Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabvest Capital and Investec Limited 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 Limited NON are associated (or correlated) with Sabvest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabvest Capital has no effect on the direction of Investec Limited i.e., Investec Limited and Sabvest Capital go up and down completely randomly.

Pair Corralation between Investec Limited and Sabvest Capital

Assuming the 90 days trading horizon Investec Limited NON is expected to under-perform the Sabvest Capital. But the stock apears to be less risky and, when comparing its historical volatility, Investec Limited NON is 2.07 times less risky than Sabvest Capital. The stock trades about -0.08 of its potential returns per unit of risk. The Sabvest Capital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  898,900  in Sabvest Capital on December 29, 2024 and sell it today you would earn a total of  40,100  from holding Sabvest Capital or generate 4.46% return on investment over 90 days.

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

Investec Limited NON  vs.  Sabvest Capital

Investec Limited NON

Risk-Adjusted Performance

Very Weak

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

Sabvest Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sabvest Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sabvest Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Investec Limited and Sabvest Capital

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

The idea behind Investec Limited NON and Sabvest Capital 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.