Correlation Between CA Sales and JSE

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

By analyzing existing cross correlation between CA Sales Holdings and JSE Limited, you can compare the effects of market volatilities on CA Sales 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 CA Sales with a short position of JSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of CA Sales and JSE.

Diversification Opportunities for CA Sales and JSE

-0.26

Correlation Coefficient

CA Sales  JSE

Very good diversification

The 3 months correlation between CAA and JSE is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CA Sales Holdings and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited and CA Sales 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 CA Sales 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 CA Sales i.e., CA Sales and JSE go up and down completely randomly.

Pair Corralation between CA Sales and JSE

Assuming the 90 days trading horizon CA Sales Holdings is expected to generate 1.75 times more return on investment than JSE. However, CA Sales is 1.75 times more volatile than JSE Limited. It trades about 0.11 of its potential returns per unit of risk. JSE Limited is currently generating about 0.07 per unit of risk. If you would invest  148,500  in CA Sales Holdings on September 3, 2024 and sell it today you would earn a total of  20,900  from holding CA Sales Holdings or generate 14.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CA Sales Holdings  vs.  JSE Limited

CA Sales Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CA Sales Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, CA Sales exhibited solid returns over the last few months and may actually be approaching a breakup point.

JSE Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, JSE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CA Sales and JSE

The main advantage of trading using opposite CA Sales and JSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CA Sales 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.

The idea behind CA Sales Holdings and JSE Limited 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.