Correlation Between Pepkor Holdings and Sebata Holdings

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

Diversification Opportunities for Pepkor Holdings and Sebata Holdings

-0.15

Correlation Coefficient

Pepkor Holdings  Sebata Holdings

Good diversification

The 3 months correlation between Pepkor and Sebata is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Pepkor Holdings and Sebata Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sebata 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 Sebata Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sebata Holdings has no effect on the direction of Pepkor Holdings i.e., Pepkor Holdings and Sebata Holdings go up and down completely randomly.

Pair Corralation between Pepkor Holdings and Sebata Holdings

Assuming the 90 days trading horizon Pepkor Holdings is expected to generate 0.42 times more return on investment than Sebata Holdings. However, Pepkor Holdings is 2.41 times less risky than Sebata Holdings. It trades about 0.66 of its potential returns per unit of risk. Sebata Holdings is currently generating about 0.07 per unit of risk. If you would invest  252,500  in Pepkor Holdings on September 27, 2024 and sell it today you would earn a total of  43,400  from holding Pepkor Holdings or generate 17.19% return on investment over 90 days.

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

Pepkor Holdings  vs.  Sebata Holdings

Pepkor Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pepkor Holdings are ranked lower than 20 (%) 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.

Sebata Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sebata Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Pepkor Holdings and Sebata Holdings

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

The idea behind Pepkor Holdings and Sebata 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.