Correlation Between RETAIL FOOD and PEPKOR

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

By analyzing existing cross correlation between RETAIL FOOD GROUP and PEPKOR LTD, you can compare the effects of market volatilities on RETAIL FOOD and PEPKOR 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 RETAIL FOOD with a short position of PEPKOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and PEPKOR.

Diversification Opportunities for RETAIL FOOD and PEPKOR

-0.49

Correlation Coefficient

RETAIL FOOD  PEPKOR

Very good diversification

The 3 months correlation between RETAIL and PEPKOR is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and PEPKOR LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPKOR LTD and RETAIL FOOD 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 RETAIL FOOD GROUP are associated (or correlated) with PEPKOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPKOR LTD has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and PEPKOR go up and down completely randomly.

Pair Corralation between RETAIL FOOD and PEPKOR

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to under-perform the PEPKOR. But the stock apears to be less risky and, when comparing its historical volatility, RETAIL FOOD GROUP is 1.91 times less risky than PEPKOR. The stock trades about -0.03 of its potential returns per unit of risk. The PEPKOR LTD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  31.00  in PEPKOR LTD on October 26, 2024 and sell it today you would earn a total of  99.00  from holding PEPKOR LTD or generate 319.35% return on investment over 90 days.

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

RETAIL FOOD GROUP  vs.  PEPKOR LTD

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PEPKOR LTD

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with RETAIL FOOD and PEPKOR

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

The idea behind RETAIL FOOD GROUP and PEPKOR LTD 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.