Correlation Between Mr Price and Truworths International

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

Diversification Opportunities for Mr Price and Truworths International

0.86

Correlation Coefficient

Mr Price  Truworths International

Very poor diversification

The 3 months correlation between MRP and Truworths is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Mr Price Group and Truworths International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truworths International 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 Truworths International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truworths International has no effect on the direction of Mr Price i.e., Mr Price and Truworths International go up and down completely randomly.

Pair Corralation between Mr Price and Truworths International

Assuming the 90 days trading horizon Mr Price Group is expected to generate 1.07 times more return on investment than Truworths International. However, Mr Price is 1.07 times more volatile than Truworths International. It trades about -0.2 of its potential returns per unit of risk. Truworths International is currently generating about -0.26 per unit of risk. If you would invest  2,908,300  in Mr Price Group on December 28, 2024 and sell it today you would lose (625,800) from holding Mr Price Group or give up 21.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Mr Price Group  vs.  Truworths International

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.

Truworths International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truworths International 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 Truworths International

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

The idea behind Mr Price Group and Truworths International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.