Correlation Between Shoprite Holdings and Nedbank

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

Diversification Opportunities for Shoprite Holdings and Nedbank

0.53

Correlation Coefficient

Shoprite Holdings  Nedbank

Very weak diversification

The 3 months correlation between Shoprite and Nedbank is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Ltd and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group 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 Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Nedbank go up and down completely randomly.

Pair Corralation between Shoprite Holdings and Nedbank

Assuming the 90 days horizon Shoprite Holdings Ltd is expected to generate 1.24 times more return on investment than Nedbank. However, Shoprite Holdings is 1.24 times more volatile than Nedbank Group. It trades about -0.04 of its potential returns per unit of risk. Nedbank Group is currently generating about -0.07 per unit of risk. If you would invest  1,657  in Shoprite Holdings Ltd on October 10, 2024 and sell it today you would lose (95.00) from holding Shoprite Holdings Ltd or give up 5.73% 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.  Nedbank Group

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.

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nedbank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals 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 Nedbank

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

The idea behind Shoprite Holdings Ltd and Nedbank Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.