Correlation Between Pepkor Holdings and African Media
Can any of the company-specific risk be diversified away by investing in both Pepkor Holdings and African 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 Pepkor Holdings and African Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pepkor Holdings and African Media Entertainment, you can compare the effects of market volatilities on Pepkor Holdings and African 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 Pepkor Holdings with a short position of African Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pepkor Holdings and African Media.
Diversification Opportunities for Pepkor Holdings and African Media
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pepkor and African is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Pepkor Holdings and African Media Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Media Entert and Pepkor Holdings 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 Pepkor Holdings are associated (or correlated) with African Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Media Entert has no effect on the direction of Pepkor Holdings i.e., Pepkor Holdings and African Media go up and down completely randomly.
Pair Corralation between Pepkor Holdings and African Media
Assuming the 90 days trading horizon Pepkor Holdings is expected to generate 0.38 times more return on investment than African Media. However, Pepkor Holdings is 2.61 times less risky than African Media. It trades about 0.2 of its potential returns per unit of risk. African Media Entertainment is currently generating about 0.07 per unit of risk. If you would invest 176,500 in Pepkor Holdings on September 24, 2024 and sell it today you would earn a total of 121,300 from holding Pepkor Holdings or generate 68.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Pepkor Holdings vs. African Media Entertainment
Performance |
Timeline |
Pepkor Holdings |
African Media Entert |
Pepkor Holdings and African Media Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pepkor Holdings and African Media
The main advantage of trading using opposite Pepkor Holdings and African Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pepkor Holdings position performs unexpectedly, African 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 African Media will offset losses from the drop in African Media's long position.Pepkor Holdings vs. Prosus NV | Pepkor Holdings vs. Compagnie Financire Richemont | Pepkor Holdings vs. British American Tobacco | Pepkor Holdings vs. Glencore PLC |
African Media vs. Harmony Gold Mining | African Media vs. Deneb Investments | African Media vs. Safari Investments RSA | African Media vs. Brimstone 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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