Correlation Between Mr Price and Nedbank

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

Diversification Opportunities for Mr Price and Nedbank

-0.54

Correlation Coefficient

Mr Price  Nedbank

Excellent diversification

The 3 months correlation between MRPLY and Nedbank is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mr Price Group and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank 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 Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Mr Price i.e., Mr Price and Nedbank go up and down completely randomly.

Pair Corralation between Mr Price and Nedbank

Assuming the 90 days horizon Mr Price Group is expected to generate 1.54 times more return on investment than Nedbank. However, Mr Price is 1.54 times more volatile than Nedbank Group. It trades about -0.11 of its potential returns per unit of risk. Nedbank Group is currently generating about -0.35 per unit of risk. If you would invest  1,596  in Mr Price Group on October 10, 2024 and sell it today you would lose (93.00) from holding Mr Price Group or give up 5.83% of portfolio value over 90 days.

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

Mr Price Group  vs.  Nedbank Group

Mr Price Group

Risk-Adjusted Performance

0 of 100

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 fairly strong essential indicators, Mr Price is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nedbank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Mr Price and Nedbank

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

The idea behind Mr Price Group and Nedbank 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.