Correlation Between Tiger Brands and Libstar Holdings

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

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

Diversification Opportunities for Tiger Brands and Libstar Holdings

0.03

Correlation Coefficient

Tiger Brands  Libstar Holdings

Significant diversification

The 3 months correlation between Tiger and Libstar is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Tiger Brands and Libstar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Libstar Holdings and Tiger Brands 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 Tiger Brands are associated (or correlated) with Libstar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Libstar Holdings has no effect on the direction of Tiger Brands i.e., Tiger Brands and Libstar Holdings go up and down completely randomly.

Pair Corralation between Tiger Brands and Libstar Holdings

Assuming the 90 days trading horizon Tiger Brands is expected to generate 0.68 times more return on investment than Libstar Holdings. However, Tiger Brands is 1.47 times less risky than Libstar Holdings. It trades about 0.68 of its potential returns per unit of risk. Libstar Holdings is currently generating about 0.09 per unit of risk. If you would invest  2,459,600  in Tiger Brands on September 24, 2024 and sell it today you would earn a total of  484,300  from holding Tiger Brands or generate 19.69% return on investment over 90 days.

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

Tiger Brands  vs.  Libstar Holdings

Tiger Brands

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tiger Brands are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Tiger Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Libstar Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Libstar Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Libstar Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tiger Brands and Libstar Holdings

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

The idea behind Tiger Brands and Libstar Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.