Correlation Between Shoprite Holdings and Aeon Co

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

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

Diversification Opportunities for Shoprite Holdings and Aeon Co

0.49

Correlation Coefficient

Shoprite Holdings  Aeon Co

Very weak diversification

The 3 months correlation between Shoprite and Aeon is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Ltd and Aeon Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Co 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 Ltd are associated (or correlated) with Aeon Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Co has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Aeon Co go up and down completely randomly.

Pair Corralation between Shoprite Holdings and Aeon Co

Assuming the 90 days horizon Shoprite Holdings Ltd is expected to under-perform the Aeon Co. In addition to that, Shoprite Holdings is 1.4 times more volatile than Aeon Co Ltd. It trades about -0.15 of its total potential returns per unit of risk. Aeon Co Ltd is currently generating about -0.16 per unit of volatility. If you would invest  2,445  in Aeon Co Ltd on October 5, 2024 and sell it today you would lose (102.00) from holding Aeon Co Ltd or give up 4.17% of portfolio value over 90 days.

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

Shoprite Holdings Ltd  vs.  Aeon Co Ltd

Shoprite Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shoprite Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Shoprite Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aeon Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shoprite Holdings and Aeon Co

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

The idea behind Shoprite Holdings Ltd and Aeon Co Ltd 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.