Correlation Between Tiger Brands and Oceana

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

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

Diversification Opportunities for Tiger Brands and Oceana

-0.02

Correlation Coefficient

Tiger Brands  Oceana

Good diversification

The 3 months correlation between Tiger and Oceana is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Tiger Brands and Oceana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceana 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 Oceana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceana has no effect on the direction of Tiger Brands i.e., Tiger Brands and Oceana go up and down completely randomly.

Pair Corralation between Tiger Brands and Oceana

Assuming the 90 days trading horizon Tiger Brands is expected to generate 1.15 times more return on investment than Oceana. However, Tiger Brands is 1.15 times more volatile than Oceana. It trades about 0.05 of its potential returns per unit of risk. Oceana is currently generating about 0.01 per unit of risk. If you would invest  2,103,098  in Tiger Brands on October 12, 2024 and sell it today you would earn a total of  794,002  from holding Tiger Brands or generate 37.75% return on investment over 90 days.

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

Tiger Brands  vs.  Oceana

Tiger Brands

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tiger Brands are ranked lower than 20 (%) 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.

Oceana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oceana has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Oceana is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tiger Brands and Oceana

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

The idea behind Tiger Brands and Oceana 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.