Correlation Between Pepkor Holdings and RMB Holdings

Can any of the company-specific risk be diversified away by investing in both Pepkor Holdings and RMB 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 RMB 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 RMB Holdings, you can compare the effects of market volatilities on Pepkor Holdings and RMB 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 RMB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pepkor Holdings and RMB Holdings.

Diversification Opportunities for Pepkor Holdings and RMB Holdings

0.7

Correlation Coefficient

Pepkor Holdings  RMB Holdings

Poor diversification

The 3 months correlation between Pepkor and RMB is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pepkor Holdings and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Pepkor Holdings i.e., Pepkor Holdings and RMB Holdings go up and down completely randomly.

Pair Corralation between Pepkor Holdings and RMB Holdings

Assuming the 90 days trading horizon Pepkor Holdings is expected to generate 0.92 times more return on investment than RMB Holdings. However, Pepkor Holdings is 1.09 times less risky than RMB Holdings. It trades about 0.78 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.16 per unit of risk. If you would invest  240,900  in Pepkor Holdings on September 24, 2024 and sell it today you would earn a total of  56,900  from holding Pepkor Holdings or generate 23.62% return on investment over 90 days.

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

Pepkor Holdings  vs.  RMB Holdings

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.

RMB Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, RMB Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pepkor Holdings and RMB Holdings

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

The idea behind Pepkor Holdings and RMB 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.