Correlation Between Coronation Smaller and Coronation Global

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

By analyzing existing cross correlation between Coronation Smaller Companies and Coronation Global Equity, you can compare the effects of market volatilities on Coronation Smaller and Coronation Global 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 Coronation Smaller with a short position of Coronation Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coronation Smaller and Coronation Global.

Diversification Opportunities for Coronation Smaller and Coronation Global

0.81

Correlation Coefficient

Coronation Smaller  Coronation Global

Very poor diversification

The 3 months correlation between Coronation and Coronation is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Smaller Companies and Coronation Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Global Equity and Coronation Smaller 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 Coronation Smaller Companies are associated (or correlated) with Coronation Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Global Equity has no effect on the direction of Coronation Smaller i.e., Coronation Smaller and Coronation Global go up and down completely randomly.

Pair Corralation between Coronation Smaller and Coronation Global

Assuming the 90 days trading horizon Coronation Smaller is expected to generate 2.47 times less return on investment than Coronation Global. But when comparing it to its historical volatility, Coronation Smaller Companies is 1.73 times less risky than Coronation Global. It trades about 0.17 of its potential returns per unit of risk. Coronation Global Equity is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  221.00  in Coronation Global Equity on September 3, 2024 and sell it today you would earn a total of  40.00  from holding Coronation Global Equity or generate 18.1% return on investment over 90 days.

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

Coronation Smaller Companies  vs.  Coronation Global Equity

Coronation Smaller

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Smaller Companies are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly weak basic indicators, Coronation Smaller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Coronation Global Equity

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Global Equity are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Coronation Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coronation Smaller and Coronation Global

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

The idea behind Coronation Smaller Companies and Coronation Global Equity 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.