Correlation Between Mr Price and CA Sales

Can any of the company-specific risk be diversified away by investing in both Mr Price and CA Sales 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 CA Sales 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 CA Sales Holdings, you can compare the effects of market volatilities on Mr Price and CA Sales 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 CA Sales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mr Price and CA Sales.

Diversification Opportunities for Mr Price and CA Sales

0.45

Correlation Coefficient

Mr Price  CA Sales

Very weak diversification

The 3 months correlation between MRP and CAA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mr Price Group and CA Sales Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CA Sales Holdings 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 CA Sales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CA Sales Holdings has no effect on the direction of Mr Price i.e., Mr Price and CA Sales go up and down completely randomly.

Pair Corralation between Mr Price and CA Sales

Assuming the 90 days trading horizon Mr Price is expected to generate 1.39 times less return on investment than CA Sales. But when comparing it to its historical volatility, Mr Price Group is 1.26 times less risky than CA Sales. It trades about 0.08 of its potential returns per unit of risk. CA Sales Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  68,332  in CA Sales Holdings on October 11, 2024 and sell it today you would earn a total of  92,668  from holding CA Sales Holdings or generate 135.61% return on investment over 90 days.

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

Mr Price Group  vs.  CA Sales Holdings

Mr Price Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Mr Price may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CA Sales Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CA Sales may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mr Price and CA Sales

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

The idea behind Mr Price Group and CA Sales Holdings 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.