Correlation Between Trencor and Safari Investments

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

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

Diversification Opportunities for Trencor and Safari Investments

-0.1

Correlation Coefficient

Trencor  Safari Investments

Good diversification

The 3 months correlation between Trencor and Safari is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Trencor and Safari Investments RSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safari Investments RSA and Trencor 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 Trencor are associated (or correlated) with Safari Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safari Investments RSA has no effect on the direction of Trencor i.e., Trencor and Safari Investments go up and down completely randomly.

Pair Corralation between Trencor and Safari Investments

Assuming the 90 days trading horizon Trencor is expected to under-perform the Safari Investments. In addition to that, Trencor is 3.38 times more volatile than Safari Investments RSA. It trades about -0.11 of its total potential returns per unit of risk. Safari Investments RSA is currently generating about -0.02 per unit of volatility. If you would invest  67,500  in Safari Investments RSA on December 28, 2024 and sell it today you would lose (4,500) from holding Safari Investments RSA or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Trencor  vs.  Safari Investments RSA

Trencor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Safari Investments RSA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Trencor and Safari Investments

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

The idea behind Trencor and Safari Investments RSA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.