Correlation Between Shoprite Holdings and AfricaRhodium ETF

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

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

Diversification Opportunities for Shoprite Holdings and AfricaRhodium ETF

-0.38

Correlation Coefficient

Shoprite Holdings  AfricaRhodium ETF

Very good diversification

The 3 months correlation between Shoprite and AfricaRhodium is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings and AfricaRhodium ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfricaRhodium ETF and Shoprite 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 Shoprite Holdings are associated (or correlated) with AfricaRhodium ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfricaRhodium ETF has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and AfricaRhodium ETF go up and down completely randomly.

Pair Corralation between Shoprite Holdings and AfricaRhodium ETF

Assuming the 90 days trading horizon Shoprite Holdings is expected to generate 0.42 times more return on investment than AfricaRhodium ETF. However, Shoprite Holdings is 2.41 times less risky than AfricaRhodium ETF. It trades about 0.05 of its potential returns per unit of risk. AfricaRhodium ETF is currently generating about -0.02 per unit of risk. If you would invest  2,950,109  in Shoprite Holdings on September 13, 2024 and sell it today you would earn a total of  97,191  from holding Shoprite Holdings or generate 3.29% return on investment over 90 days.

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

Shoprite Holdings  vs.  AfricaRhodium ETF

Shoprite Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shoprite Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Shoprite Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AfricaRhodium ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AfricaRhodium ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AfricaRhodium ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shoprite Holdings and AfricaRhodium ETF

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

The idea behind Shoprite Holdings and AfricaRhodium ETF 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.