Correlation Between Shoprite Holdings and HomeChoice Investments
Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings and HomeChoice Investments 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 Shoprite Holdings and HomeChoice Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoprite Holdings and HomeChoice Investments, you can compare the effects of market volatilities on Shoprite Holdings and HomeChoice Investments 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 Shoprite Holdings with a short position of HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and HomeChoice Investments.
Diversification Opportunities for Shoprite Holdings and HomeChoice Investments
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shoprite and HomeChoice is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments and Shoprite Holdings 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 Shoprite Holdings are associated (or correlated) with HomeChoice Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeChoice Investments has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and HomeChoice Investments go up and down completely randomly.
Pair Corralation between Shoprite Holdings and HomeChoice Investments
Assuming the 90 days trading horizon Shoprite Holdings is expected to generate 1.26 times less return on investment than HomeChoice Investments. But when comparing it to its historical volatility, Shoprite Holdings is 1.85 times less risky than HomeChoice Investments. It trades about 0.04 of its potential returns per unit of risk. HomeChoice Investments is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 241,738 in HomeChoice Investments on September 3, 2024 and sell it today you would earn a total of 58,262 from holding HomeChoice Investments or generate 24.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Shoprite Holdings vs. HomeChoice Investments
Performance |
| Timeline |
| Shoprite Holdings |
| HomeChoice Investments |
Shoprite Holdings and HomeChoice Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoprite Holdings and HomeChoice Investments
The main advantage of trading using opposite Shoprite Holdings and HomeChoice Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoprite Holdings position performs unexpectedly, HomeChoice Investments 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 HomeChoice Investments will offset losses from the drop in HomeChoice Investments' long position.| Shoprite Holdings vs. HomeChoice Investments | Shoprite Holdings vs. Safari Investments RSA | Shoprite Holdings vs. CA Sales Holdings | Shoprite Holdings vs. Master Drilling Group |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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