Correlation Between Indexco Limited and Allan Gray

Can any of the company-specific risk be diversified away by investing in both Indexco Limited and Allan Gray 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 Indexco Limited and Allan Gray into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indexco Limited and Allan Gray Equity, you can compare the effects of market volatilities on Indexco Limited and Allan Gray 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 Indexco Limited with a short position of Allan Gray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indexco Limited and Allan Gray.

Diversification Opportunities for Indexco Limited and Allan Gray

0.15

Correlation Coefficient

Indexco Limited  Allan Gray

Average diversification

The 3 months correlation between Indexco and Allan is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Indexco Limited and Allan Gray Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allan Gray Equity and Indexco Limited 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 Indexco Limited are associated (or correlated) with Allan Gray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allan Gray Equity has no effect on the direction of Indexco Limited i.e., Indexco Limited and Allan Gray go up and down completely randomly.

Pair Corralation between Indexco Limited and Allan Gray

Assuming the 90 days trading horizon Indexco Limited is expected to under-perform the Allan Gray. In addition to that, Indexco Limited is 1.35 times more volatile than Allan Gray Equity. It trades about -0.04 of its total potential returns per unit of risk. Allan Gray Equity is currently generating about -0.01 per unit of volatility. If you would invest  60,127  in Allan Gray Equity on October 9, 2024 and sell it today you would lose (166.00) from holding Allan Gray Equity or give up 0.28% of portfolio value over 90 days.

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

Indexco Limited   vs.  Allan Gray Equity

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Allan Gray Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allan Gray Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong basic indicators, Allan Gray is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Indexco Limited and Allan Gray

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

The idea behind Indexco Limited and Allan Gray Equity 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.