Correlation Between Investec and Everus Construction

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

By analyzing existing cross correlation between Investec Group and Everus Construction Group, you can compare the effects of market volatilities on Investec and Everus Construction 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 Everus Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec and Everus Construction.

Diversification Opportunities for Investec and Everus Construction

0.53

Correlation Coefficient

Investec  Everus Construction

Very weak diversification

The 3 months correlation between Investec and Everus is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Investec Group and Everus Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everus Construction 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 Group are associated (or correlated) with Everus Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everus Construction has no effect on the direction of Investec i.e., Investec and Everus Construction go up and down completely randomly.

Pair Corralation between Investec and Everus Construction

Assuming the 90 days horizon Investec is expected to generate 9.74 times less return on investment than Everus Construction. But when comparing it to its historical volatility, Investec Group is 7.44 times less risky than Everus Construction. It trades about 0.13 of its potential returns per unit of risk. Everus Construction Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,900  in Everus Construction Group on October 13, 2024 and sell it today you would earn a total of  1,567  from holding Everus Construction Group or generate 31.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.95%
Values	Daily Returns

Investec Group  vs.  Everus Construction Group

Investec Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, Investec is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Everus Construction

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Everus Construction Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Everus Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investec and Everus Construction

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

The idea behind Investec Group and Everus Construction Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.