Correlation Between Investec PLC and RCL Foods
Can any of the company-specific risk be diversified away by investing in both Investec PLC and RCL Foods 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 PLC and RCL Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investec PLC and RCL Foods, you can compare the effects of market volatilities on Investec PLC and RCL Foods 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 PLC with a short position of RCL Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investec PLC and RCL Foods.
Diversification Opportunities for Investec PLC and RCL Foods
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Investec and RCL is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Investec PLC and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods and Investec PLC 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 PLC are associated (or correlated) with RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Investec PLC i.e., Investec PLC and RCL Foods go up and down completely randomly.
Pair Corralation between Investec PLC and RCL Foods
Assuming the 90 days trading horizon Investec PLC is expected to under-perform the RCL Foods. But the stock apears to be less risky and, when comparing its historical volatility, Investec PLC is 2.22 times less risky than RCL Foods. The stock trades about -0.23 of its potential returns per unit of risk. The RCL Foods is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 92,000 in RCL Foods on October 9, 2024 and sell it today you would earn a total of 6,500 from holding RCL Foods or generate 7.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investec PLC vs. RCL Foods
Performance |
| Timeline |
| Investec PLC |
| RCL Foods |
Investec PLC and RCL Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investec PLC and RCL Foods
The main advantage of trading using opposite Investec PLC and RCL Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec PLC position performs unexpectedly, RCL Foods 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 RCL Foods will offset losses from the drop in RCL Foods' long position.| Investec PLC vs. Reinet Investments SCA | Investec PLC vs. HomeChoice Investments | Investec PLC vs. Deneb Investments | Investec PLC vs. Zeder Investments |
| RCL Foods vs. Master Drilling Group | RCL Foods vs. Hosken Consolidated Investments | RCL Foods vs. Kumba Iron Ore | RCL Foods vs. African Media Entertainment |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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