Correlation Between JSE and Dis Chem
Can any of the company-specific risk be diversified away by investing in both JSE and Dis Chem 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 JSE and Dis Chem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JSE Limited and Dis Chem Pharmacies, you can compare the effects of market volatilities on JSE and Dis Chem 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 JSE with a short position of Dis Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of JSE and Dis Chem.
Diversification Opportunities for JSE and Dis Chem
Very good diversification
The 3 months correlation between JSE and Dis is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding JSE Limited and Dis Chem Pharmacies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dis Chem Pharmacies and JSE 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 JSE Limited are associated (or correlated) with Dis Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dis Chem Pharmacies has no effect on the direction of JSE i.e., JSE and Dis Chem go up and down completely randomly.
Pair Corralation between JSE and Dis Chem
Assuming the 90 days trading horizon JSE Limited is expected to generate 1.02 times more return on investment than Dis Chem. However, JSE is 1.02 times more volatile than Dis Chem Pharmacies. It trades about 0.07 of its potential returns per unit of risk. Dis Chem Pharmacies is currently generating about 0.06 per unit of risk. If you would invest 1,070,800 in JSE Limited on September 24, 2024 and sell it today you would earn a total of 110,700 from holding JSE Limited or generate 10.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
JSE Limited vs. Dis Chem Pharmacies
Performance |
Timeline |
JSE Limited |
Dis Chem Pharmacies |
JSE and Dis Chem Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with JSE and Dis Chem
The main advantage of trading using opposite JSE and Dis Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JSE position performs unexpectedly, Dis Chem 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 Dis Chem will offset losses from the drop in Dis Chem's long position.JSE vs. Prosus NV | JSE vs. Compagnie Financire Richemont | JSE vs. British American Tobacco | JSE vs. Anglo American PLC |
Check out your portfolio center.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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