Correlation Between NewFunds Low and Coronation Smaller

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

By analyzing existing cross correlation between NewFunds Low Volatility and Coronation Smaller Companies, you can compare the effects of market volatilities on NewFunds Low and Coronation Smaller 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 NewFunds Low with a short position of Coronation Smaller. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewFunds Low and Coronation Smaller.

Diversification Opportunities for NewFunds Low and Coronation Smaller

0.51

Correlation Coefficient

NewFunds Low  Coronation Smaller

Very weak diversification

The 3 months correlation between NewFunds and Coronation is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding NewFunds Low Volatility and Coronation Smaller Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Smaller and NewFunds Low 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 NewFunds Low Volatility are associated (or correlated) with Coronation Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Smaller has no effect on the direction of NewFunds Low i.e., NewFunds Low and Coronation Smaller go up and down completely randomly.

Pair Corralation between NewFunds Low and Coronation Smaller

Assuming the 90 days trading horizon NewFunds Low is expected to generate 1.73 times less return on investment than Coronation Smaller. But when comparing it to its historical volatility, NewFunds Low Volatility is 1.01 times less risky than Coronation Smaller. It trades about 0.12 of its potential returns per unit of risk. Coronation Smaller Companies is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  12,879  in Coronation Smaller Companies on September 12, 2024 and sell it today you would earn a total of  1,059  from holding Coronation Smaller Companies or generate 8.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

NewFunds Low Volatility  vs.  Coronation Smaller Companies

NewFunds Low Volatility

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds Low Volatility are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NewFunds Low is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Coronation Smaller

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Smaller Companies are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly weak basic indicators, Coronation Smaller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NewFunds Low and Coronation Smaller

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

The idea behind NewFunds Low Volatility and Coronation Smaller Companies 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.