Correlation Between NewFunds Low and Coronation Equity

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

Diversification Opportunities for NewFunds Low and Coronation Equity

0.14

Correlation Coefficient

NewFunds Low  Coronation Equity

Average diversification

The 3 months correlation between NewFunds and Coronation is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding NewFunds Low Volatility and Coronation Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Equity 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Equity has no effect on the direction of NewFunds Low i.e., NewFunds Low and Coronation Equity go up and down completely randomly.

Pair Corralation between NewFunds Low and Coronation Equity

Assuming the 90 days trading horizon NewFunds Low Volatility is expected to under-perform the Coronation Equity. But the etf apears to be less risky and, when comparing its historical volatility, NewFunds Low Volatility is 1.25 times less risky than Coronation Equity. The etf trades about -0.1 of its potential returns per unit of risk. The Coronation Equity is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  28,954  in Coronation Equity on December 5, 2024 and sell it today you would earn a total of  965.00  from holding Coronation Equity or generate 3.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

NewFunds Low Volatility  vs.  Coronation Equity

NewFunds Low Volatility

Risk-Adjusted Performance

Very Weak

Over the last 90 days NewFunds Low Volatility has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Equity

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Equity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Coronation Equity is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NewFunds Low and Coronation Equity

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

The idea behind NewFunds Low Volatility and Coronation 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.