Correlation Between RCL Foods and Nampak
Can any of the company-specific risk be diversified away by investing in both RCL Foods and Nampak 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 RCL Foods and Nampak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCL Foods and Nampak, you can compare the effects of market volatilities on RCL Foods and Nampak 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 RCL Foods with a short position of Nampak. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCL Foods and Nampak.
Diversification Opportunities for RCL Foods and Nampak
Significant diversification
The 3 months correlation between RCL and Nampak is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Nampak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nampak and RCL Foods 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 RCL Foods are associated (or correlated) with Nampak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nampak has no effect on the direction of RCL Foods i.e., RCL Foods and Nampak go up and down completely randomly.
Pair Corralation between RCL Foods and Nampak
Assuming the 90 days trading horizon RCL Foods is expected to under-perform the Nampak. In addition to that, RCL Foods is 1.03 times more volatile than Nampak. It trades about -0.02 of its total potential returns per unit of risk. Nampak is currently generating about 0.21 per unit of volatility. If you would invest 1,849,000 in Nampak on September 3, 2024 and sell it today you would earn a total of 2,514,200 from holding Nampak or generate 135.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RCL Foods vs. Nampak
Performance |
| Timeline |
| RCL Foods |
| Nampak |
RCL Foods and Nampak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RCL Foods and Nampak
The main advantage of trading using opposite RCL Foods and Nampak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods position performs unexpectedly, Nampak 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 Nampak will offset losses from the drop in Nampak's long position.| RCL Foods vs. Blue Label Telecoms | RCL Foods vs. African Media Entertainment | RCL Foods vs. Life Healthcare | RCL Foods vs. Kap Industrial Holdings |
| Nampak vs. RCL Foods | Nampak vs. Kumba Iron Ore | Nampak vs. Allied Electronics | Nampak vs. HomeChoice Investments |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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