Correlation Between Investec Emerging and Johnson Institutional

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

By analyzing existing cross correlation between Investec Emerging Markets and Johnson Institutional Intermediate, you can compare the effects of market volatilities on Investec Emerging and Johnson Institutional 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 Investec Emerging with a short position of Johnson Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec Emerging and Johnson Institutional.

Diversification Opportunities for Investec Emerging and Johnson Institutional

0.76

Correlation Coefficient

Investec Emerging  Johnson Institutional

Poor diversification

The 3 months correlation between Investec and Johnson is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Investec Emerging Markets and Johnson Institutional Intermed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Institutional and Investec Emerging 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 Investec Emerging Markets are associated (or correlated) with Johnson Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Institutional has no effect on the direction of Investec Emerging i.e., Investec Emerging and Johnson Institutional go up and down completely randomly.

Pair Corralation between Investec Emerging and Johnson Institutional

Assuming the 90 days horizon Investec Emerging Markets is expected to generate 4.94 times more return on investment than Johnson Institutional. However, Investec Emerging is 4.94 times more volatile than Johnson Institutional Intermediate. It trades about 0.11 of its potential returns per unit of risk. Johnson Institutional Intermediate is currently generating about 0.2 per unit of risk. If you would invest  1,066  in Investec Emerging Markets on December 21, 2024 and sell it today you would earn a total of  70.00  from holding Investec Emerging Markets or generate 6.57% return on investment over 90 days.

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

Investec Emerging Markets  vs.  Johnson Institutional Intermed

Investec Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Emerging Markets are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Investec Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Johnson Institutional

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Institutional Intermediate are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Johnson Institutional is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investec Emerging and Johnson Institutional

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

The idea behind Investec Emerging Markets and Johnson Institutional Intermediate 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.