Correlation Between SA Corporate and Pan African
Can any of the company-specific risk be diversified away by investing in both SA Corporate and Pan African 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 SA Corporate and Pan African into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SA Corporate Real and Pan African Resources, you can compare the effects of market volatilities on SA Corporate and Pan African 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 SA Corporate with a short position of Pan African. Check out your portfolio center. Please also check ongoing floating volatility patterns of SA Corporate and Pan African.
Diversification Opportunities for SA Corporate and Pan African
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between SAC and Pan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SA Corporate Real and Pan African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan African Resources and SA Corporate 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 SA Corporate Real are associated (or correlated) with Pan African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan African Resources has no effect on the direction of SA Corporate i.e., SA Corporate and Pan African go up and down completely randomly.
Pair Corralation between SA Corporate and Pan African
Assuming the 90 days trading horizon SA Corporate is expected to generate 6.3 times less return on investment than Pan African. But when comparing it to its historical volatility, SA Corporate Real is 1.4 times less risky than Pan African. It trades about 0.03 of its potential returns per unit of risk. Pan African Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 71,300 in Pan African Resources on September 12, 2024 and sell it today you would earn a total of 14,900 from holding Pan African Resources or generate 20.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SA Corporate Real vs. Pan African Resources
Performance |
| Timeline |
| SA Corporate Real |
| Pan African Resources |
SA Corporate and Pan African Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SA Corporate and Pan African
The main advantage of trading using opposite SA Corporate and Pan African positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SA Corporate position performs unexpectedly, Pan African 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 Pan African will offset losses from the drop in Pan African's long position.| SA Corporate vs. Datatec | SA Corporate vs. Harmony Gold Mining | SA Corporate vs. Hosken Consolidated Investments | SA Corporate vs. HomeChoice Investments |
| Pan African vs. CA Sales Holdings | Pan African vs. Blue Label Telecoms | Pan African vs. AfroCentric Investment Corp | Pan African vs. Zeder 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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