Correlation Between E Media and Datatec
Can any of the company-specific risk be diversified away by investing in both E Media and Datatec 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 E Media and Datatec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E Media Holdings and Datatec, you can compare the effects of market volatilities on E Media and Datatec 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 E Media with a short position of Datatec. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Media and Datatec.
Diversification Opportunities for E Media and Datatec
Good diversification
The 3 months correlation between EMH and Datatec is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding E Media Holdings and Datatec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datatec and E Media 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 E Media Holdings are associated (or correlated) with Datatec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datatec has no effect on the direction of E Media i.e., E Media and Datatec go up and down completely randomly.
Pair Corralation between E Media and Datatec
Assuming the 90 days trading horizon E Media is expected to generate 2.56 times less return on investment than Datatec. In addition to that, E Media is 2.3 times more volatile than Datatec. It trades about 0.02 of its total potential returns per unit of risk. Datatec is currently generating about 0.09 per unit of volatility. If you would invest 481,600 in Datatec on November 3, 2024 and sell it today you would earn a total of 13,200 from holding Datatec or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E Media Holdings vs. Datatec
Performance |
| Timeline |
| E Media Holdings |
| Datatec |
E Media and Datatec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Media and Datatec
The main advantage of trading using opposite E Media and Datatec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Media position performs unexpectedly, Datatec 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 Datatec will offset losses from the drop in Datatec's long position.| E Media vs. Frontier Transport Holdings | E Media vs. Nedbank Group | E Media vs. Harmony Gold Mining | E Media vs. Lesaka Technologies |
| Datatec vs. Standard Bank Group | Datatec vs. Hosken Consolidated Investments | Datatec vs. Safari Investments RSA | Datatec vs. Reinet Investments SCA |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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