Correlation Between Pick N and Indexco Limited

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

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

Diversification Opportunities for Pick N and Indexco Limited

0.25

Correlation Coefficient

Pick N  Indexco Limited

Modest diversification

The 3 months correlation between Pick and Indexco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pick N Pay and Indexco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indexco Limited and Pick N 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 Pick N Pay are associated (or correlated) with Indexco Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indexco Limited has no effect on the direction of Pick N i.e., Pick N and Indexco Limited go up and down completely randomly.

Pair Corralation between Pick N and Indexco Limited

Assuming the 90 days trading horizon Pick N Pay is expected to generate 3.83 times more return on investment than Indexco Limited. However, Pick N is 3.83 times more volatile than Indexco Limited . It trades about 0.4 of its potential returns per unit of risk. Indexco Limited is currently generating about 0.31 per unit of risk. If you would invest  262,200  in Pick N Pay on September 15, 2024 and sell it today you would earn a total of  47,900  from holding Pick N Pay or generate 18.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Pick N Pay  vs.  Indexco Limited

Pick N Pay

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pick N Pay are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Pick N exhibited solid returns over the last few months and may actually be approaching a breakup point.

Indexco Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indexco Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Indexco Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pick N and Indexco Limited

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

The idea behind Pick N Pay and Indexco Limited 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.