Correlation Between Shoprite Holdings and Tokyu Corp

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

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

Diversification Opportunities for Shoprite Holdings and Tokyu Corp

-0.39

Correlation Coefficient

Shoprite Holdings  Tokyu Corp

Very good diversification

The 3 months correlation between Shoprite and Tokyu is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Limited and Tokyu Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Corp ADR 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 Limited are associated (or correlated) with Tokyu Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Corp ADR has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Tokyu Corp go up and down completely randomly.

Pair Corralation between Shoprite Holdings and Tokyu Corp

Assuming the 90 days horizon Shoprite Holdings Limited is expected to generate 0.56 times more return on investment than Tokyu Corp. However, Shoprite Holdings Limited is 1.79 times less risky than Tokyu Corp. It trades about 0.07 of its potential returns per unit of risk. Tokyu Corp ADR is currently generating about 0.01 per unit of risk. If you would invest  1,456  in Shoprite Holdings Limited on September 23, 2024 and sell it today you would earn a total of  177.00  from holding Shoprite Holdings Limited or generate 12.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.59%
Values	Daily Returns

Shoprite Holdings Limited  vs.  Tokyu Corp ADR

Shoprite Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shoprite Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Shoprite Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tokyu Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shoprite Holdings and Tokyu Corp

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

The idea behind Shoprite Holdings Limited and Tokyu Corp ADR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.