Correlation Between Safari Investments and Trencor

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

Diversification Opportunities for Safari Investments and Trencor

-0.1

Correlation Coefficient

Safari Investments  Trencor

Good diversification

The 3 months correlation between Safari and Trencor is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Safari Investments RSA and Trencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trencor 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 Trencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trencor has no effect on the direction of Safari Investments i.e., Safari Investments and Trencor go up and down completely randomly.

Pair Corralation between Safari Investments and Trencor

Assuming the 90 days trading horizon Safari Investments RSA is expected to generate 0.3 times more return on investment than Trencor. However, Safari Investments RSA is 3.38 times less risky than Trencor. It trades about -0.02 of its potential returns per unit of risk. Trencor is currently generating about -0.11 per unit of risk. If you would invest  67,500  in Safari Investments RSA on December 28, 2024 and sell it today you would lose (4,500) from holding Safari Investments RSA or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Safari Investments RSA  vs.  Trencor

Safari Investments RSA

Risk-Adjusted Performance

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.

Trencor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Safari Investments and Trencor

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

The idea behind Safari Investments RSA and Trencor 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..