Correlation Between PEPKOR and Marks

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

By analyzing existing cross correlation between PEPKOR LTD and Marks and Spencer, you can compare the effects of market volatilities on PEPKOR and Marks 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 with a short position of Marks. Check out your portfolio center. Please also check ongoing floating volatility patterns of PEPKOR and Marks.

Diversification Opportunities for PEPKOR and Marks

0.65

Correlation Coefficient

PEPKOR  Marks

Poor diversification

The 3 months correlation between PEPKOR and Marks is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PEPKOR LTD and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer and PEPKOR 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 LTD are associated (or correlated) with Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of PEPKOR i.e., PEPKOR and Marks go up and down completely randomly.

Pair Corralation between PEPKOR and Marks

Assuming the 90 days trading horizon PEPKOR LTD is expected to generate 1.44 times more return on investment than Marks. However, PEPKOR is 1.44 times more volatile than Marks and Spencer. It trades about 0.21 of its potential returns per unit of risk. Marks and Spencer is currently generating about 0.05 per unit of risk. If you would invest  116.00  in PEPKOR LTD on September 23, 2024 and sell it today you would earn a total of  43.00  from holding PEPKOR LTD or generate 37.07% return on investment over 90 days.

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

PEPKOR LTD  vs.  Marks and Spencer

PEPKOR LTD

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PEPKOR LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PEPKOR reported solid returns over the last few months and may actually be approaching a breakup point.

Marks and Spencer

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marks and Spencer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marks is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PEPKOR and Marks

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

The idea behind PEPKOR LTD and Marks and Spencer 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.