Correlation Between Marks and Pick N
Can any of the company-specific risk be diversified away by investing in both Marks and Pick N 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 Marks and Pick N into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marks and Spencer and Pick n Pay, you can compare the effects of market volatilities on Marks and Pick N 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 Marks with a short position of Pick N. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marks and Pick N.
Diversification Opportunities for Marks and Pick N
Poor diversification
The 3 months correlation between Marks and Pick is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and Pick n Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pick n Pay and Marks 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 Marks and Spencer are associated (or correlated) with Pick N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pick n Pay has no effect on the direction of Marks i.e., Marks and Pick N go up and down completely randomly.
Pair Corralation between Marks and Pick N
Assuming the 90 days horizon Marks is expected to generate 1.5 times less return on investment than Pick N. But when comparing it to its historical volatility, Marks and Spencer is 2.04 times less risky than Pick N. It trades about 0.11 of its potential returns per unit of risk. Pick n Pay is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 116.00 in Pick n Pay on September 3, 2024 and sell it today you would earn a total of 39.00 from holding Pick n Pay or generate 33.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marks and Spencer vs. Pick n Pay
Performance |
| Timeline |
| Marks and Spencer |
| Pick n Pay |
Marks and Pick N Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marks and Pick N
The main advantage of trading using opposite Marks and Pick N positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marks position performs unexpectedly, Pick N 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 Pick N will offset losses from the drop in Pick N's long position.| Marks vs. RYOHIN UNSPADR1 | Marks vs. Superior Plus Corp | Marks vs. NMI Holdings | Marks vs. Origin Agritech |
| Pick N vs. AIR PRODCHEMICALS | Pick N vs. ELECTRONIC ARTS | Pick N vs. Meiko Electronics Co | Pick N vs. Methode Electronics |
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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