Correlation Between Shoprite Holdings and Dillards

Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings and Dillards 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 Dillards 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 Dillards, you can compare the effects of market volatilities on Shoprite Holdings and Dillards 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 Dillards. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and Dillards.

Diversification Opportunities for Shoprite Holdings and Dillards

-0.09

Correlation Coefficient

Shoprite Holdings  Dillards

Good diversification

The 3 months correlation between Shoprite and Dillards is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Ltd and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards 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 Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Dillards go up and down completely randomly.

Pair Corralation between Shoprite Holdings and Dillards

Assuming the 90 days horizon Shoprite Holdings is expected to generate 1.68 times less return on investment than Dillards. But when comparing it to its historical volatility, Shoprite Holdings Ltd is 1.26 times less risky than Dillards. It trades about 0.03 of its potential returns per unit of risk. Dillards is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  33,674  in Dillards on October 5, 2024 and sell it today you would earn a total of  11,397  from holding Dillards or generate 33.85% return on investment over 90 days.

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

Shoprite Holdings Ltd  vs.  Dillards

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.

Dillards

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Dillards unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shoprite Holdings and Dillards

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

The idea behind Shoprite Holdings Ltd and Dillards 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.