Correlation Between Mr Price and Workforce Holdings

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

Diversification Opportunities for Mr Price and Workforce Holdings

0.41

Correlation Coefficient

Mr Price  Workforce Holdings

Very weak diversification

The 3 months correlation between MRP and Workforce is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Mr Price Group and Workforce Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workforce 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 Workforce Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workforce Holdings has no effect on the direction of Mr Price i.e., Mr Price and Workforce Holdings go up and down completely randomly.

Pair Corralation between Mr Price and Workforce Holdings

Assuming the 90 days trading horizon Mr Price Group is expected to generate 0.65 times more return on investment than Workforce Holdings. However, Mr Price Group is 1.54 times less risky than Workforce Holdings. It trades about 0.08 of its potential returns per unit of risk. Workforce Holdings is currently generating about 0.01 per unit of risk. If you would invest  1,513,182  in Mr Price Group on October 12, 2024 and sell it today you would earn a total of  1,256,718  from holding Mr Price Group or generate 83.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Mr Price Group  vs.  Workforce Holdings

Mr Price Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group 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, Mr Price may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Workforce Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workforce Holdings 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Mr Price and Workforce Holdings

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

The idea behind Mr Price Group and Workforce 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.