Correlation Between Foschini and Lewis Group
Can any of the company-specific risk be diversified away by investing in both Foschini and Lewis Group 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 Foschini and Lewis Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foschini Group and Lewis Group Limited, you can compare the effects of market volatilities on Foschini and Lewis Group 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 Foschini with a short position of Lewis Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foschini and Lewis Group.
Diversification Opportunities for Foschini and Lewis Group
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Foschini and Lewis is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Foschini Group and Lewis Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lewis Group Limited and Foschini 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 Foschini Group are associated (or correlated) with Lewis Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lewis Group Limited has no effect on the direction of Foschini i.e., Foschini and Lewis Group go up and down completely randomly.
Pair Corralation between Foschini and Lewis Group
Assuming the 90 days trading horizon Foschini Group is expected to generate 0.79 times more return on investment than Lewis Group. However, Foschini Group is 1.26 times less risky than Lewis Group. It trades about 0.21 of its potential returns per unit of risk. Lewis Group Limited is currently generating about 0.14 per unit of risk. If you would invest 1,473,000 in Foschini Group on September 23, 2024 and sell it today you would earn a total of 251,000 from holding Foschini Group or generate 17.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Foschini Group vs. Lewis Group Limited
Performance |
Timeline |
Foschini Group |
Lewis Group Limited |
Foschini and Lewis Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Foschini and Lewis Group
The main advantage of trading using opposite Foschini and Lewis Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foschini position performs unexpectedly, Lewis Group 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 Lewis Group will offset losses from the drop in Lewis Group's long position.Foschini vs. Lewis Group Limited | Foschini vs. HomeChoice Investments | Foschini vs. RMB Holdings | Foschini vs. Aveng |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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