Correlation Between Nampak and Transpaco

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

By analyzing existing cross correlation between Nampak and Transpaco, you can compare the effects of market volatilities on Nampak and Transpaco 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 Transpaco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nampak and Transpaco.

Diversification Opportunities for Nampak and Transpaco

0.09

Correlation Coefficient

Nampak  Transpaco

Significant diversification

The 3 months correlation between Nampak and Transpaco is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nampak and Transpaco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transpaco 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 Transpaco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transpaco has no effect on the direction of Nampak i.e., Nampak and Transpaco go up and down completely randomly.

Pair Corralation between Nampak and Transpaco

Assuming the 90 days trading horizon Nampak is expected to generate 15.96 times more return on investment than Transpaco. However, Nampak is 15.96 times more volatile than Transpaco. It trades about 0.06 of its potential returns per unit of risk. Transpaco is currently generating about 0.04 per unit of risk. If you would invest  2,575,000  in Nampak on September 24, 2024 and sell it today you would earn a total of  1,489,500  from holding Nampak or generate 57.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nampak  vs.  Transpaco

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.

Transpaco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transpaco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Transpaco 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 Transpaco

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

The idea behind Nampak and Transpaco 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.