Correlation Between Mr Price and Dis Chem

Can any of the company-specific risk be diversified away by investing in both Mr Price 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 Mr Price and Dis Chem 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 Dis Chem Pharmacies, you can compare the effects of market volatilities on Mr Price 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 Mr Price with a short position of Dis Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mr Price and Dis Chem.

Diversification Opportunities for Mr Price and Dis Chem

0.94

Correlation Coefficient

Mr Price  Dis Chem

Almost no diversification

The 3 months correlation between MRP and Dis is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Mr Price Group 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 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 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 Mr Price i.e., Mr Price and Dis Chem go up and down completely randomly.

Pair Corralation between Mr Price and Dis Chem

Assuming the 90 days trading horizon Mr Price Group is expected to under-perform the Dis Chem. In addition to that, Mr Price is 1.63 times more volatile than Dis Chem Pharmacies. It trades about -0.21 of its total potential returns per unit of risk. Dis Chem Pharmacies is currently generating about -0.24 per unit of volatility. If you would invest  362,400  in Dis Chem Pharmacies on December 25, 2024 and sell it today you would lose (56,600) from holding Dis Chem Pharmacies or give up 15.62% of portfolio value over 90 days.

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

Mr Price Group  vs.  Dis Chem Pharmacies

Mr Price Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mr Price Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Dis Chem Pharmacies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dis Chem Pharmacies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Mr Price and Dis Chem

The main advantage of trading using opposite Mr Price and Dis Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mr Price 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.

The idea behind Mr Price Group and Dis Chem Pharmacies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.