Correlation Between Pepkor Holdings and Mr Price

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

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

Diversification Opportunities for Pepkor Holdings and Mr Price

0.89

Correlation Coefficient

Pepkor Holdings  Mr Price

Very poor diversification

The 3 months correlation between Pepkor and MRP is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pepkor Holdings and Mr Price Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Price Group 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 Mr Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Price Group has no effect on the direction of Pepkor Holdings i.e., Pepkor Holdings and Mr Price go up and down completely randomly.

Pair Corralation between Pepkor Holdings and Mr Price

Assuming the 90 days trading horizon Pepkor Holdings is expected to generate 0.73 times more return on investment than Mr Price. However, Pepkor Holdings is 1.37 times less risky than Mr Price. It trades about 0.29 of its potential returns per unit of risk. Mr Price Group is currently generating about 0.14 per unit of risk. If you would invest  237,400  in Pepkor Holdings on September 23, 2024 and sell it today you would earn a total of  60,400  from holding Pepkor Holdings or generate 25.44% return on investment over 90 days.

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

Pepkor Holdings  vs.  Mr Price Group

Pepkor Holdings

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 23 (%) 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.

Mr Price Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Mr Price exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pepkor Holdings and Mr Price

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

The idea behind Pepkor Holdings and Mr Price Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.