Correlation Between Shoprite Holdings and JSE
Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings and JSE 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 JSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoprite Holdings and JSE Limited, you can compare the effects of market volatilities on Shoprite Holdings and JSE 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 JSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and JSE.
Diversification Opportunities for Shoprite Holdings and JSE
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shoprite and JSE is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited 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 JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and JSE go up and down completely randomly.
Pair Corralation between Shoprite Holdings and JSE
Assuming the 90 days trading horizon Shoprite Holdings is expected to under-perform the JSE. But the stock apears to be less risky and, when comparing its historical volatility, Shoprite Holdings is 1.71 times less risky than JSE. The stock trades about -0.37 of its potential returns per unit of risk. The JSE Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,175,000 in JSE Limited on November 18, 2024 and sell it today you would earn a total of 88,800 from holding JSE Limited or generate 7.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shoprite Holdings vs. JSE Limited
Performance |
| Timeline |
| Shoprite Holdings |
| JSE Limited |
Shoprite Holdings and JSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoprite Holdings and JSE
The main advantage of trading using opposite Shoprite Holdings and JSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoprite Holdings position performs unexpectedly, JSE 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 JSE will offset losses from the drop in JSE's long position.| Shoprite Holdings vs. MC Mining | Shoprite Holdings vs. Advtech | Shoprite Holdings vs. Safari Investments RSA | Shoprite Holdings vs. Blue Label Telecoms |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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