Correlation Between E Media and Shoprite Holdings
Can any of the company-specific risk be diversified away by investing in both E Media and Shoprite Holdings 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 Shoprite Holdings 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 Shoprite Holdings, you can compare the effects of market volatilities on E Media and Shoprite Holdings 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 Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Media and Shoprite Holdings.
Diversification Opportunities for E Media and Shoprite Holdings
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between EMH and Shoprite is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding E Media Holdings and Shoprite Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of E Media i.e., E Media and Shoprite Holdings go up and down completely randomly.
Pair Corralation between E Media and Shoprite Holdings
Assuming the 90 days trading horizon E Media Holdings is expected to under-perform the Shoprite Holdings. In addition to that, E Media is 4.03 times more volatile than Shoprite Holdings. It trades about -0.09 of its total potential returns per unit of risk. Shoprite Holdings is currently generating about -0.24 per unit of volatility. If you would invest 2,872,900 in Shoprite Holdings on November 28, 2024 and sell it today you would lose (131,800) from holding Shoprite Holdings or give up 4.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
E Media Holdings vs. Shoprite Holdings
Performance |
| Timeline |
| E Media Holdings |
| Shoprite Holdings |
E Media and Shoprite Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Media and Shoprite Holdings
The main advantage of trading using opposite E Media and Shoprite Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Media position performs unexpectedly, Shoprite Holdings 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 Shoprite Holdings will offset losses from the drop in Shoprite Holdings' long position.| E Media vs. Kumba Iron Ore | E Media vs. ABSA Bank Limited | E Media vs. Afine Investments | E Media vs. Bytes Technology |
| Shoprite Holdings vs. Harmony Gold Mining | Shoprite Holdings vs. Copper 360 | Shoprite Holdings vs. Frontier Transport Holdings | Shoprite Holdings vs. City Lodge Hotels |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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