Correlation Between Pan African and SLM Corp
Can any of the company-specific risk be diversified away by investing in both Pan African and SLM Corp 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 Pan African and SLM Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan African Resources and Sanlam, you can compare the effects of market volatilities on Pan African and SLM Corp 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 Pan African with a short position of SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan African and SLM Corp.
Diversification Opportunities for Pan African and SLM Corp
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pan and SLM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pan African Resources and Sanlam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp and Pan African 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 Pan African Resources are associated (or correlated) with SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Pan African i.e., Pan African and SLM Corp go up and down completely randomly.
Pair Corralation between Pan African and SLM Corp
Assuming the 90 days trading horizon Pan African Resources is expected to generate 1.44 times more return on investment than SLM Corp. However, Pan African is 1.44 times more volatile than Sanlam. It trades about 0.15 of its potential returns per unit of risk. Sanlam is currently generating about 0.12 per unit of risk. If you would invest 57,700 in Pan African Resources on September 5, 2024 and sell it today you would earn a total of 27,100 from holding Pan African Resources or generate 46.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan African Resources vs. Sanlam
Performance |
| Timeline |
| Pan African Resources |
| SLM Corp |
Pan African and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan African and SLM Corp
The main advantage of trading using opposite Pan African and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan African position performs unexpectedly, SLM Corp 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 SLM Corp will offset losses from the drop in SLM Corp's long position.| Pan African vs. Standard Bank Group | Pan African vs. Hosken Consolidated Investments | Pan African vs. Astoria Investments | Pan African vs. Safari Investments RSA |
| SLM Corp vs. Pan African Resources | SLM Corp vs. Sasol Ltd Bee | SLM Corp vs. Growthpoint Properties | SLM Corp vs. AfricaRhodium ETF |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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