Correlation Between International Business and Shoprite Holdings
Can any of the company-specific risk be diversified away by investing in both International Business 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 International Business and Shoprite Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and Shoprite Holdings Ltd, you can compare the effects of market volatilities on International Business 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 International Business with a short position of Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Shoprite Holdings.
Diversification Opportunities for International Business and Shoprite Holdings
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Shoprite is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Shoprite Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings and International Business 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 International Business Machines 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 International Business i.e., International Business and Shoprite Holdings go up and down completely randomly.
Pair Corralation between International Business and Shoprite Holdings
Considering the 90-day investment horizon International Business Machines is expected to generate 0.63 times more return on investment than Shoprite Holdings. However, International Business Machines is 1.58 times less risky than Shoprite Holdings. It trades about 0.29 of its potential returns per unit of risk. Shoprite Holdings Ltd is currently generating about -0.12 per unit of risk. If you would invest 21,190 in International Business Machines on September 12, 2024 and sell it today you would earn a total of 1,982 from holding International Business Machines or generate 9.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Business Machine vs. Shoprite Holdings Ltd
Performance |
| Timeline |
| International Business |
| Shoprite Holdings |
International Business and Shoprite Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and Shoprite Holdings
The main advantage of trading using opposite International Business and Shoprite Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.| International Business vs. The Hackett Group | International Business vs. Nayax | International Business vs. Formula Systems 1985 | International Business vs. Information Services Group |
| Shoprite Holdings vs. Sanlam Ltd PK | Shoprite Holdings vs. Vodacom Group Ltd | Shoprite Holdings vs. Woolworths Holdings Ltd | Shoprite Holdings vs. Standard Bank Group |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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