Correlation Between HomeChoice Investments and JSE
Can any of the company-specific risk be diversified away by investing in both HomeChoice Investments and JSE 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 HomeChoice Investments and JSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HomeChoice Investments and JSE Limited, you can compare the effects of market volatilities on HomeChoice Investments and JSE 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 HomeChoice Investments with a short position of JSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeChoice Investments and JSE.
Diversification Opportunities for HomeChoice Investments and JSE
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HomeChoice and JSE is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited and HomeChoice Investments 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 HomeChoice Investments are associated (or correlated) with JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and JSE go up and down completely randomly.
Pair Corralation between HomeChoice Investments and JSE
Assuming the 90 days trading horizon HomeChoice Investments is expected to under-perform the JSE. In addition to that, HomeChoice Investments is 4.0 times more volatile than JSE Limited. It trades about -0.21 of its total potential returns per unit of risk. JSE Limited is currently generating about -0.25 per unit of volatility. If you would invest 1,264,800 in JSE Limited on September 2, 2024 and sell it today you would lose (82,800) from holding JSE Limited or give up 6.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
HomeChoice Investments vs. JSE Limited
Performance |
| Timeline |
| HomeChoice Investments |
| JSE Limited |
HomeChoice Investments and JSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HomeChoice Investments and JSE
The main advantage of trading using opposite HomeChoice Investments and JSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeChoice Investments position performs unexpectedly, JSE 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 JSE will offset losses from the drop in JSE's long position.| HomeChoice Investments vs. RCL Foods | HomeChoice Investments vs. Hosken Consolidated Investments | HomeChoice Investments vs. Deneb Investments | HomeChoice Investments vs. Bytes Technology |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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