Correlation Between Shoprite Holdings and SLM Corp

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

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

Diversification Opportunities for Shoprite Holdings and SLM Corp

0.0

Correlation Coefficient

Shoprite Holdings  SLM Corp

Pay attention - limited upside

The 3 months correlation between Shoprite and SLM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings and Sanlam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and SLM Corp go up and down completely randomly.

Pair Corralation between Shoprite Holdings and SLM Corp

Assuming the 90 days trading horizon Shoprite Holdings is expected to under-perform the SLM Corp. But the stock apears to be less risky and, when comparing its historical volatility, Shoprite Holdings is 1.16 times less risky than SLM Corp. The stock trades about -0.12 of its potential returns per unit of risk. The Sanlam is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  864,300  in Sanlam on December 30, 2024 and sell it today you would lose (16,900) from holding Sanlam or give up 1.96% of portfolio value over 90 days.

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

Shoprite Holdings  vs.  Sanlam

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.

SLM Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shoprite Holdings and SLM Corp

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

The idea behind Shoprite Holdings and Sanlam 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.