Correlation Between Shoprite Holdings and JSE

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

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

Diversification Opportunities for Shoprite Holdings and JSE

-0.77

Correlation Coefficient

Shoprite Holdings  JSE

Pay attention - limited upside

The 3 months correlation between Shoprite and JSE is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited 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 JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and JSE go up and down completely randomly.

Pair Corralation between Shoprite Holdings and JSE

Assuming the 90 days trading horizon Shoprite Holdings is expected to under-perform the JSE. But the stock apears to be less risky and, when comparing its historical volatility, Shoprite Holdings is 1.24 times less risky than JSE. The stock trades about -0.12 of its potential returns per unit of risk. The JSE Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,180,700  in JSE Limited on December 30, 2024 and sell it today you would earn a total of  85,900  from holding JSE Limited or generate 7.28% return on investment over 90 days.

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

Shoprite Holdings  vs.  JSE Limited

Shoprite Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoprite 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.

JSE Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, JSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shoprite Holdings and JSE

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

The idea behind Shoprite Holdings and JSE Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..