Correlation Between El Puerto and Shoprite Holdings

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

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

Diversification Opportunities for El Puerto and Shoprite Holdings

-0.64

Correlation Coefficient

El Puerto  Shoprite Holdings

Excellent diversification

The 3 months correlation between ELPQF and Shoprite is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding El Puerto de and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings and El Puerto 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 El Puerto de are associated (or correlated) with Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of El Puerto i.e., El Puerto and Shoprite Holdings go up and down completely randomly.

Pair Corralation between El Puerto and Shoprite Holdings

Assuming the 90 days horizon El Puerto de is expected to under-perform the Shoprite Holdings. In addition to that, El Puerto is 5.34 times more volatile than Shoprite Holdings Limited. It trades about -0.17 of its total potential returns per unit of risk. Shoprite Holdings Limited is currently generating about 0.28 per unit of volatility. If you would invest  1,607  in Shoprite Holdings Limited on September 24, 2024 and sell it today you would earn a total of  26.00  from holding Shoprite Holdings Limited or generate 1.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	20.31%
Values	Daily Returns

El Puerto de  vs.  Shoprite Holdings Limited

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Shoprite Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Shoprite Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Shoprite Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with El Puerto and Shoprite Holdings

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

The idea behind El Puerto de and Shoprite 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.