Correlation Between Indexco Limited and JSE

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

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

Diversification Opportunities for Indexco Limited and JSE

0.82

Correlation Coefficient

Indexco Limited  JSE

Very poor diversification

The 3 months correlation between Indexco and JSE is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Indexco Limited and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited 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 JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of Indexco Limited i.e., Indexco Limited and JSE go up and down completely randomly.

Pair Corralation between Indexco Limited and JSE

Assuming the 90 days trading horizon Indexco Limited is expected to generate 1.02 times less return on investment than JSE. But when comparing it to its historical volatility, Indexco Limited is 1.72 times less risky than JSE. It trades about 0.15 of its potential returns per unit of risk. JSE Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,180,700  in JSE Limited on December 28, 2024 and sell it today you would earn a total of  84,700  from holding JSE Limited or generate 7.17% return on investment over 90 days.

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

Indexco Limited   vs.  JSE Limited

Indexco Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indexco Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Indexco Limited may actually be approaching a critical reversion point that can send shares even higher in April 2025.

JSE Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, JSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Indexco Limited and JSE

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

The idea behind Indexco Limited and JSE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.