Correlation Between Mr Price and Afine Investments

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

By analyzing existing cross correlation between Mr Price Group and Afine Investments, you can compare the effects of market volatilities on Mr Price and Afine Investments 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 Mr Price with a short position of Afine Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mr Price and Afine Investments.

Diversification Opportunities for Mr Price and Afine Investments

0.64

Correlation Coefficient

Mr Price  Afine Investments

Poor diversification

The 3 months correlation between MRP and Afine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Mr Price Group and Afine Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afine Investments and Mr Price 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 Mr Price Group are associated (or correlated) with Afine Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afine Investments has no effect on the direction of Mr Price i.e., Mr Price and Afine Investments go up and down completely randomly.

Pair Corralation between Mr Price and Afine Investments

Assuming the 90 days trading horizon Mr Price is expected to generate 1.52 times less return on investment than Afine Investments. But when comparing it to its historical volatility, Mr Price Group is 3.13 times less risky than Afine Investments. It trades about 0.16 of its potential returns per unit of risk. Afine Investments is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  38,313  in Afine Investments on September 24, 2024 and sell it today you would earn a total of  1,787  from holding Afine Investments or generate 4.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Mr Price Group  vs.  Afine Investments

Mr Price Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Mr Price exhibited solid returns over the last few months and may actually be approaching a breakup point.

Afine Investments

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Afine Investments are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Afine Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mr Price and Afine Investments

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

The idea behind Mr Price Group and Afine Investments 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.