Correlation Between Dis Chem and EMedia Holdings

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

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

Diversification Opportunities for Dis Chem and EMedia Holdings

0.09

Correlation Coefficient

Dis Chem  EMedia Holdings

Significant diversification

The 3 months correlation between Dis and EMedia is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dis Chem Pharmacies and eMedia Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eMedia Holdings and Dis Chem 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 Dis Chem Pharmacies are associated (or correlated) with EMedia Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eMedia Holdings has no effect on the direction of Dis Chem i.e., Dis Chem and EMedia Holdings go up and down completely randomly.

Pair Corralation between Dis Chem and EMedia Holdings

Assuming the 90 days trading horizon Dis Chem is expected to generate 3.18 times less return on investment than EMedia Holdings. But when comparing it to its historical volatility, Dis Chem Pharmacies is 1.84 times less risky than EMedia Holdings. It trades about 0.07 of its potential returns per unit of risk. eMedia Holdings Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  31,500  in eMedia Holdings Limited on September 14, 2024 and sell it today you would earn a total of  6,000  from holding eMedia Holdings Limited or generate 19.05% return on investment over 90 days.

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

Dis Chem Pharmacies  vs.  eMedia Holdings Limited

Dis Chem Pharmacies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dis Chem Pharmacies 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, Dis Chem is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

eMedia Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eMedia Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, EMedia Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dis Chem and EMedia Holdings

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

The idea behind Dis Chem Pharmacies and eMedia Holdings 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.