Correlation Between Satrix 40 and Indexco Limited

Can any of the company-specific risk be diversified away by investing in both Satrix 40 and Indexco Limited 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 Indexco Limited 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 Indexco Limited , you can compare the effects of market volatilities on Satrix 40 and Indexco Limited 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 Indexco Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Satrix 40 and Indexco Limited.

Diversification Opportunities for Satrix 40 and Indexco Limited

0.97

Correlation Coefficient

Satrix 40  Indexco Limited

Almost no diversification

The 3 months correlation between Satrix and Indexco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Satrix 40 ETF and Indexco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indexco Limited 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 Indexco Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indexco Limited has no effect on the direction of Satrix 40 i.e., Satrix 40 and Indexco Limited go up and down completely randomly.

Pair Corralation between Satrix 40 and Indexco Limited

Assuming the 90 days trading horizon Satrix 40 ETF is expected to generate 1.02 times more return on investment than Indexco Limited. However, Satrix 40 is 1.02 times more volatile than Indexco Limited . It trades about 0.08 of its potential returns per unit of risk. Indexco Limited is currently generating about 0.08 per unit of risk. If you would invest  629,212  in Satrix 40 ETF on September 24, 2024 and sell it today you would earn a total of  135,888  from holding Satrix 40 ETF or generate 21.6% return on investment over 90 days.

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

Satrix 40 ETF  vs.  Indexco Limited

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.

Indexco Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indexco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Indexco Limited 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 Indexco Limited

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

The idea behind Satrix 40 ETF and Indexco Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.