Correlation Between Mr Price and Nampak

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

Diversification Opportunities for Mr Price and Nampak

-0.47

Correlation Coefficient

Mr Price  Nampak

Very good diversification

The 3 months correlation between MRP and Nampak is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Mr Price Group and Nampak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nampak 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 Nampak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nampak has no effect on the direction of Mr Price i.e., Mr Price and Nampak go up and down completely randomly.

Pair Corralation between Mr Price and Nampak

Assuming the 90 days trading horizon Mr Price Group is expected to generate 0.35 times more return on investment than Nampak. However, Mr Price Group is 2.87 times less risky than Nampak. It trades about 0.16 of its potential returns per unit of risk. Nampak is currently generating about -0.13 per unit of risk. If you would invest  2,856,167  in Mr Price Group on September 24, 2024 and sell it today you would earn a total of  121,233  from holding Mr Price Group or generate 4.24% return on investment over 90 days.

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

Mr Price Group  vs.  Nampak

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.

Nampak

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mr Price and Nampak

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

The idea behind Mr Price Group and Nampak 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.