Correlation Between Mr Price and MultiChoice

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

Diversification Opportunities for Mr Price and MultiChoice

-0.6

Correlation Coefficient

Mr Price  MultiChoice

Excellent diversification

The 3 months correlation between MRP and MultiChoice is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mr Price Group and MultiChoice Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MultiChoice Group 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 MultiChoice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MultiChoice Group has no effect on the direction of Mr Price i.e., Mr Price and MultiChoice go up and down completely randomly.

Pair Corralation between Mr Price and MultiChoice

Assuming the 90 days trading horizon Mr Price Group is expected to generate 4.62 times more return on investment than MultiChoice. However, Mr Price is 4.62 times more volatile than MultiChoice Group. It trades about 0.14 of its potential returns per unit of risk. MultiChoice Group is currently generating about 0.09 per unit of risk. If you would invest  2,856,167  in Mr Price Group on September 25, 2024 and sell it today you would earn a total of  113,833  from holding Mr Price Group or generate 3.99% return on investment over 90 days.

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

Mr Price Group  vs.  MultiChoice Group

Mr Price Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group are ranked lower than 9 (%) 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.

MultiChoice Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MultiChoice Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MultiChoice is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mr Price and MultiChoice

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

The idea behind Mr Price Group and MultiChoice Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.