Correlation Between Satrix 40 and Satrix Indi

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

Diversification Opportunities for Satrix 40 and Satrix Indi

0.83

Correlation Coefficient

Satrix 40  Satrix Indi

Very poor diversification

The 3 months correlation between Satrix and Satrix is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Satrix 40 ETF and Satrix Indi ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satrix Indi 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 Satrix Indi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satrix Indi ETF has no effect on the direction of Satrix 40 i.e., Satrix 40 and Satrix Indi go up and down completely randomly.

Pair Corralation between Satrix 40 and Satrix Indi

Assuming the 90 days trading horizon Satrix 40 is expected to generate 1.64 times less return on investment than Satrix Indi. But when comparing it to its historical volatility, Satrix 40 ETF is 1.31 times less risky than Satrix Indi. It trades about 0.34 of its potential returns per unit of risk. Satrix Indi ETF is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  1,136,500  in Satrix Indi ETF on September 16, 2024 and sell it today you would earn a total of  72,100  from holding Satrix Indi ETF or generate 6.34% return on investment over 90 days.

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

Satrix 40 ETF  vs.  Satrix Indi ETF

Satrix 40 ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Satrix 40 ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. 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.

Satrix Indi ETF

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Satrix Indi ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Satrix Indi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Satrix 40 and Satrix Indi

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

The idea behind Satrix 40 ETF and Satrix Indi 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..