Correlation Between Satrix 40 and AfricaRhodium ETF

Can any of the company-specific risk be diversified away by investing in both Satrix 40 and AfricaRhodium ETF 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 Satrix 40 and AfricaRhodium ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Satrix 40 ETF and AfricaRhodium ETF, you can compare the effects of market volatilities on Satrix 40 and AfricaRhodium ETF 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 Satrix 40 with a short position of AfricaRhodium ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Satrix 40 and AfricaRhodium ETF.

Diversification Opportunities for Satrix 40 and AfricaRhodium ETF

-0.08

Correlation Coefficient

Satrix 40  AfricaRhodium ETF

Good diversification

The 3 months correlation between Satrix and AfricaRhodium is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Satrix 40 ETF and AfricaRhodium ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfricaRhodium ETF and Satrix 40 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 Satrix 40 ETF are associated (or correlated) with AfricaRhodium ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfricaRhodium ETF has no effect on the direction of Satrix 40 i.e., Satrix 40 and AfricaRhodium ETF go up and down completely randomly.

Pair Corralation between Satrix 40 and AfricaRhodium ETF

Assuming the 90 days trading horizon Satrix 40 ETF is expected to generate 0.3 times more return on investment than AfricaRhodium ETF. However, Satrix 40 ETF is 3.3 times less risky than AfricaRhodium ETF. It trades about 0.04 of its potential returns per unit of risk. AfricaRhodium ETF is currently generating about -0.04 per unit of risk. If you would invest  656,380  in Satrix 40 ETF on September 24, 2024 and sell it today you would earn a total of  108,720  from holding Satrix 40 ETF or generate 16.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Satrix 40 ETF  vs.  AfricaRhodium ETF

Satrix 40 ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Satrix 40 ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Satrix 40 is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

AfricaRhodium ETF

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AfricaRhodium ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AfricaRhodium ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Satrix 40 and AfricaRhodium ETF

The main advantage of trading using opposite Satrix 40 and AfricaRhodium ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Satrix 40 position performs unexpectedly, AfricaRhodium ETF 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 AfricaRhodium ETF will offset losses from the drop in AfricaRhodium ETF's long position.

The idea behind Satrix 40 ETF and AfricaRhodium ETF 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.