Correlation Between Investec Limited and Sab Zenzele

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

Diversification Opportunities for Investec Limited and Sab Zenzele

-0.57

Correlation Coefficient

Investec Limited  Sab Zenzele

Excellent diversification

The 3 months correlation between Investec and Sab is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Investec Limited NON and Sab Zenzele Kabili in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sab Zenzele Kabili 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 Sab Zenzele. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sab Zenzele Kabili has no effect on the direction of Investec Limited i.e., Investec Limited and Sab Zenzele go up and down completely randomly.

Pair Corralation between Investec Limited and Sab Zenzele

Assuming the 90 days trading horizon Investec Limited NON is expected to under-perform the Sab Zenzele. But the stock apears to be less risky and, when comparing its historical volatility, Investec Limited NON is 4.98 times less risky than Sab Zenzele. The stock trades about -0.08 of its potential returns per unit of risk. The Sab Zenzele Kabili is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  400,000  in Sab Zenzele Kabili on December 30, 2024 and sell it today you would lose (10,000) from holding Sab Zenzele Kabili or give up 2.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Investec Limited NON  vs.  Sab Zenzele Kabili

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.

Sab Zenzele Kabili

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sab Zenzele Kabili are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sab Zenzele 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 Sab Zenzele

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

The idea behind Investec Limited NON and Sab Zenzele Kabili 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.