Correlation Between Investec Limited and Indexco Limited

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

Diversification Opportunities for Investec Limited and Indexco Limited

-0.48

Correlation Coefficient

Investec Limited  Indexco Limited

Very good diversification

The 3 months correlation between Investec and Indexco is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Investec Limited NON and Indexco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indexco Limited 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 Indexco Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indexco Limited has no effect on the direction of Investec Limited i.e., Investec Limited and Indexco Limited go up and down completely randomly.

Pair Corralation between Investec Limited and Indexco Limited

Assuming the 90 days trading horizon Investec Limited NON is expected to under-perform the Indexco Limited. In addition to that, Investec Limited is 1.39 times more volatile than Indexco Limited . It trades about -0.01 of its total potential returns per unit of risk. Indexco Limited is currently generating about 0.07 per unit of volatility. If you would invest  428,300  in Indexco Limited on December 5, 2024 and sell it today you would earn a total of  4,000  from holding Indexco Limited or generate 0.93% return on investment over 90 days.

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

Investec Limited NON  vs.  Indexco Limited

Investec Limited NON

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Limited NON are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Indexco Limited

Risk-Adjusted Performance

Insignificant

Over the last 90 days Indexco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Indexco Limited is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investec Limited and Indexco Limited

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

The idea behind Investec Limited NON and Indexco 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.