Correlation Between Shoprite Holdings and Pick N

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

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

Diversification Opportunities for Shoprite Holdings and Pick N

0.45

Correlation Coefficient

Shoprite Holdings  Pick N

Very weak diversification

The 3 months correlation between Shoprite and Pick is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings and Pick N Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pick N Pay 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 Pick N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pick N Pay has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Pick N go up and down completely randomly.

Pair Corralation between Shoprite Holdings and Pick N

Assuming the 90 days trading horizon Shoprite Holdings is expected to under-perform the Pick N. But the stock apears to be less risky and, when comparing its historical volatility, Shoprite Holdings is 1.48 times less risky than Pick N. The stock trades about -0.26 of its potential returns per unit of risk. The Pick N Pay is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  279,800  in Pick N Pay on December 4, 2024 and sell it today you would lose (2,300) from holding Pick N Pay or give up 0.82% of portfolio value over 90 days.

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

Shoprite Holdings  vs.  Pick N Pay

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 weak 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.

Pick N Pay

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pick N Pay 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 Shoprite Holdings and Pick N

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

The idea behind Shoprite Holdings and Pick N Pay 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.