Correlation Between Nampak and E Media

Can any of the company-specific risk be diversified away by investing in both Nampak and E Media 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 Nampak and E Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nampak and E Media Holdings, you can compare the effects of market volatilities on Nampak and E Media 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 Nampak with a short position of E Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nampak and E Media.

Diversification Opportunities for Nampak and E Media

0.26

Correlation Coefficient

Nampak  E Media

Modest diversification

The 3 months correlation between Nampak and EMH is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nampak and E Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Media Holdings and Nampak 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 Nampak are associated (or correlated) with E Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Media Holdings has no effect on the direction of Nampak i.e., Nampak and E Media go up and down completely randomly.

Pair Corralation between Nampak and E Media

Assuming the 90 days trading horizon Nampak is expected to generate 1.08 times more return on investment than E Media. However, Nampak is 1.08 times more volatile than E Media Holdings. It trades about 0.07 of its potential returns per unit of risk. E Media Holdings is currently generating about 0.01 per unit of risk. If you would invest  2,050,000  in Nampak on September 30, 2024 and sell it today you would earn a total of  2,127,500  from holding Nampak or generate 103.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.73%
Values	Daily Returns

Nampak  vs.  E Media Holdings

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 rather sound technical and fundamental indicators, Nampak is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

E Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nampak and E Media

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

The idea behind Nampak and E Media 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.