Correlation Between Allan Gray and Resilient Property

Can any of the company-specific risk be diversified away by investing in both Allan Gray and Resilient Property 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 Allan Gray and Resilient Property into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allan Gray Equity and Resilient Property Income, you can compare the effects of market volatilities on Allan Gray and Resilient Property 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 Allan Gray with a short position of Resilient Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allan Gray and Resilient Property.

Diversification Opportunities for Allan Gray and Resilient Property

-0.22

Correlation Coefficient

Allan Gray  Resilient Property

Very good diversification

The 3 months correlation between Allan and Resilient is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Allan Gray Equity and Resilient Property Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resilient Property Income and Allan Gray 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 Allan Gray Equity are associated (or correlated) with Resilient Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resilient Property Income has no effect on the direction of Allan Gray i.e., Allan Gray and Resilient Property go up and down completely randomly.

Pair Corralation between Allan Gray and Resilient Property

Assuming the 90 days trading horizon Allan Gray is expected to generate 1.11 times less return on investment than Resilient Property. But when comparing it to its historical volatility, Allan Gray Equity is 2.14 times less risky than Resilient Property. It trades about 0.17 of its potential returns per unit of risk. Resilient Property Income is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  565,400  in Resilient Property Income on September 5, 2024 and sell it today you would earn a total of  32,300  from holding Resilient Property Income or generate 5.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Allan Gray Equity  vs.  Resilient Property Income

Allan Gray Equity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allan Gray Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Allan Gray is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Resilient Property Income

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Resilient Property Income are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Resilient Property is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allan Gray and Resilient Property

The main advantage of trading using opposite Allan Gray and Resilient Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allan Gray position performs unexpectedly, Resilient Property 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 Resilient Property will offset losses from the drop in Resilient Property's long position.

The idea behind Allan Gray Equity and Resilient Property Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.