Correlation Between Sphere Entertainment and Shoprite Holdings

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

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

Diversification Opportunities for Sphere Entertainment and Shoprite Holdings

-0.72

Correlation Coefficient

Sphere Entertainment  Shoprite Holdings

Pay attention - limited upside

The 3 months correlation between Sphere and Shoprite is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings and Sphere Entertainment 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 Sphere Entertainment Co are associated (or correlated) with Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of Sphere Entertainment i.e., Sphere Entertainment and Shoprite Holdings go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Shoprite Holdings

Given the investment horizon of 90 days Sphere Entertainment is expected to generate 1.93 times less return on investment than Shoprite Holdings. In addition to that, Sphere Entertainment is 1.79 times more volatile than Shoprite Holdings Limited. It trades about 0.04 of its total potential returns per unit of risk. Shoprite Holdings Limited is currently generating about 0.15 per unit of volatility. If you would invest  1,370  in Shoprite Holdings Limited on September 23, 2024 and sell it today you would earn a total of  263.00  from holding Shoprite Holdings Limited or generate 19.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	59.84%
Values	Daily Returns

Sphere Entertainment Co  vs.  Shoprite Holdings Limited

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Shoprite Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Shoprite Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Shoprite Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sphere Entertainment and Shoprite Holdings

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

The idea behind Sphere Entertainment Co and Shoprite Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.