Correlation Between Netcare and Growthpoint Properties

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

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

Diversification Opportunities for Netcare and Growthpoint Properties

-0.43

Correlation Coefficient

Netcare  Growthpoint Properties

Very good diversification

The 3 months correlation between Netcare and Growthpoint is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Netcare and Growthpoint Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growthpoint Properties and Netcare 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 Netcare are associated (or correlated) with Growthpoint Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growthpoint Properties has no effect on the direction of Netcare i.e., Netcare and Growthpoint Properties go up and down completely randomly.

Pair Corralation between Netcare and Growthpoint Properties

Assuming the 90 days trading horizon Netcare is expected to generate 1.08 times more return on investment than Growthpoint Properties. However, Netcare is 1.08 times more volatile than Growthpoint Properties. It trades about 0.16 of its potential returns per unit of risk. Growthpoint Properties is currently generating about -0.02 per unit of risk. If you would invest  133,500  in Netcare on September 5, 2024 and sell it today you would earn a total of  17,500  from holding Netcare or generate 13.11% return on investment over 90 days.

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

Netcare  vs.  Growthpoint Properties

Netcare

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netcare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Netcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Growthpoint Properties

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Netcare and Growthpoint Properties

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

The idea behind Netcare and Growthpoint Properties 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.