Correlation Between Pepkor Holdings and Discovery Holdings

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

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

Diversification Opportunities for Pepkor Holdings and Discovery Holdings

0.61

Correlation Coefficient

Pepkor Holdings  Discovery Holdings

Poor diversification

The 3 months correlation between Pepkor and Discovery is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Pepkor Holdings and Discovery Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discovery Holdings 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 Discovery Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discovery Holdings has no effect on the direction of Pepkor Holdings i.e., Pepkor Holdings and Discovery Holdings go up and down completely randomly.

Pair Corralation between Pepkor Holdings and Discovery Holdings

Assuming the 90 days trading horizon Pepkor Holdings is expected to generate 1.08 times less return on investment than Discovery Holdings. In addition to that, Pepkor Holdings is 1.22 times more volatile than Discovery Holdings. It trades about 0.05 of its total potential returns per unit of risk. Discovery Holdings is currently generating about 0.06 per unit of volatility. If you would invest  1,357,182  in Discovery Holdings on October 12, 2024 and sell it today you would earn a total of  608,218  from holding Discovery Holdings or generate 44.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Pepkor Holdings  vs.  Discovery Holdings

Pepkor Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pepkor Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Discovery Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Discovery Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pepkor Holdings and Discovery Holdings

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

The idea behind Pepkor Holdings and Discovery 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.