Correlation Between JSE and CoreShares TotalWldStock

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

By analyzing existing cross correlation between JSE Limited and CoreShares TotalWldStock ETF, you can compare the effects of market volatilities on JSE and CoreShares TotalWldStock 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 CoreShares TotalWldStock. Check out your portfolio center. Please also check ongoing floating volatility patterns of JSE and CoreShares TotalWldStock.

Diversification Opportunities for JSE and CoreShares TotalWldStock

-0.46

Correlation Coefficient

JSE  CoreShares TotalWldStock

Very good diversification

The 3 months correlation between JSE and CoreShares is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding JSE Limited and CoreShares TotalWldStock ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreShares TotalWldStock 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 CoreShares TotalWldStock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreShares TotalWldStock has no effect on the direction of JSE i.e., JSE and CoreShares TotalWldStock go up and down completely randomly.

Pair Corralation between JSE and CoreShares TotalWldStock

Assuming the 90 days trading horizon JSE is expected to generate 2.07 times less return on investment than CoreShares TotalWldStock. In addition to that, JSE is 1.41 times more volatile than CoreShares TotalWldStock ETF. It trades about 0.04 of its total potential returns per unit of risk. CoreShares TotalWldStock ETF is currently generating about 0.1 per unit of volatility. If you would invest  147,800  in CoreShares TotalWldStock ETF on September 13, 2024 and sell it today you would earn a total of  8,300  from holding CoreShares TotalWldStock ETF or generate 5.62% return on investment over 90 days.

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

JSE Limited  vs.  CoreShares TotalWldStock ETF

JSE Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, JSE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CoreShares TotalWldStock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CoreShares TotalWldStock ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, CoreShares TotalWldStock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JSE and CoreShares TotalWldStock

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

The idea behind JSE Limited and CoreShares TotalWldStock ETF 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.