Correlation Between Shoprite Holdings and SM Investments
Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings and SM 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 SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoprite Holdings Ltd and SM Investments, you can compare the effects of market volatilities on Shoprite Holdings and SM 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 SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and SM Investments.
Diversification Opportunities for Shoprite Holdings and SM Investments
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Shoprite and SVTMF is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Ltd and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM 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 Ltd are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and SM Investments go up and down completely randomly.
Pair Corralation between Shoprite Holdings and SM Investments
Assuming the 90 days horizon Shoprite Holdings Ltd is expected to generate 1.04 times more return on investment than SM Investments. However, Shoprite Holdings is 1.04 times more volatile than SM Investments. It trades about 0.06 of its potential returns per unit of risk. SM Investments is currently generating about 0.02 per unit of risk. If you would invest 1,323 in Shoprite Holdings Ltd on September 4, 2024 and sell it today you would earn a total of 372.00 from holding Shoprite Holdings Ltd or generate 28.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 65.18% |
| Values | Daily Returns |
Shoprite Holdings Ltd vs. SM Investments
Performance |
| Timeline |
| Shoprite Holdings |
| SM Investments |
Shoprite Holdings and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoprite Holdings and SM Investments
The main advantage of trading using opposite Shoprite Holdings and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoprite Holdings position performs unexpectedly, SM 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 SM Investments will offset losses from the drop in SM Investments' long position.| Shoprite Holdings vs. Sanlam Ltd PK | Shoprite Holdings vs. Vodacom Group Ltd | Shoprite Holdings vs. Woolworths Holdings Ltd | Shoprite Holdings vs. Standard Bank Group |
| SM Investments vs. Paiute Oil Mining | SM Investments vs. Sonos Inc | SM Investments vs. Playa Hotels Resorts | SM Investments vs. Summit Materials |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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