Correlation Between Safari Investments and Exxaro Resources

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

By analyzing existing cross correlation between Safari Investments RSA and Exxaro Resources, you can compare the effects of market volatilities on Safari Investments and Exxaro Resources 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 Safari Investments with a short position of Exxaro Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safari Investments and Exxaro Resources.

Diversification Opportunities for Safari Investments and Exxaro Resources

-0.4

Correlation Coefficient

Safari Investments  Exxaro Resources

Very good diversification

The 3 months correlation between Safari and Exxaro is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Safari Investments RSA and Exxaro Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxaro Resources and Safari Investments 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 Safari Investments RSA are associated (or correlated) with Exxaro Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxaro Resources has no effect on the direction of Safari Investments i.e., Safari Investments and Exxaro Resources go up and down completely randomly.

Pair Corralation between Safari Investments and Exxaro Resources

Assuming the 90 days trading horizon Safari Investments RSA is expected to generate 1.36 times more return on investment than Exxaro Resources. However, Safari Investments is 1.36 times more volatile than Exxaro Resources. It trades about -0.02 of its potential returns per unit of risk. Exxaro Resources is currently generating about -0.07 per unit of risk. If you would invest  69,900  in Safari Investments RSA on October 24, 2024 and sell it today you would lose (2,700) from holding Safari Investments RSA or give up 3.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Safari Investments RSA  vs.  Exxaro Resources

Safari Investments RSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safari Investments RSA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Safari Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Exxaro Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxaro Resources 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 Safari Investments and Exxaro Resources

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

The idea behind Safari Investments RSA and Exxaro Resources 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.