Correlation Between Sysco and SHOPRITE HDGS

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

By analyzing existing cross correlation between Sysco and SHOPRITE HDGS ADR, you can compare the effects of market volatilities on Sysco and SHOPRITE HDGS 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 Sysco with a short position of SHOPRITE HDGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sysco and SHOPRITE HDGS.

Diversification Opportunities for Sysco and SHOPRITE HDGS

0.7

Correlation Coefficient

Sysco  SHOPRITE HDGS

Poor diversification

The 3 months correlation between Sysco and SHOPRITE is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sysco and SHOPRITE HDGS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHOPRITE HDGS ADR and Sysco 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 Sysco are associated (or correlated) with SHOPRITE HDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHOPRITE HDGS ADR has no effect on the direction of Sysco i.e., Sysco and SHOPRITE HDGS go up and down completely randomly.

Pair Corralation between Sysco and SHOPRITE HDGS

Assuming the 90 days horizon Sysco is expected to generate 0.86 times more return on investment than SHOPRITE HDGS. However, Sysco is 1.16 times less risky than SHOPRITE HDGS. It trades about -0.13 of its potential returns per unit of risk. SHOPRITE HDGS ADR is currently generating about -0.12 per unit of risk. If you would invest  7,388  in Sysco on December 27, 2024 and sell it today you would lose (882.00) from holding Sysco or give up 11.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Sysco  vs.  SHOPRITE HDGS ADR

Sysco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sysco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SHOPRITE HDGS ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHOPRITE HDGS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sysco and SHOPRITE HDGS

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

The idea behind Sysco and SHOPRITE HDGS ADR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.