Correlation Between AfricaRhodium ETF and JSE

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

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

Diversification Opportunities for AfricaRhodium ETF and JSE

0.0

Correlation Coefficient

AfricaRhodium ETF  JSE

Pay attention - limited upside

The 3 months correlation between AfricaRhodium and JSE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AfricaRhodium ETF and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited and AfricaRhodium ETF 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 AfricaRhodium ETF 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 AfricaRhodium ETF i.e., AfricaRhodium ETF and JSE go up and down completely randomly.

Pair Corralation between AfricaRhodium ETF and JSE

Assuming the 90 days trading horizon AfricaRhodium ETF is expected to generate 4.06 times less return on investment than JSE. In addition to that, AfricaRhodium ETF is 2.6 times more volatile than JSE Limited. It trades about 0.01 of its total potential returns per unit of risk. JSE Limited is currently generating about 0.07 per unit of volatility. If you would invest  1,125,000  in JSE Limited on September 3, 2024 and sell it today you would earn a total of  57,000  from holding JSE Limited or generate 5.07% return on investment over 90 days.

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

AfricaRhodium ETF  vs.  JSE Limited

AfricaRhodium ETF

Risk-Adjusted Performance

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Very Weak

Over the last 90 days AfricaRhodium ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AfricaRhodium ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 AfricaRhodium ETF and JSE

The main advantage of trading using opposite AfricaRhodium ETF and JSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AfricaRhodium ETF 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 AfricaRhodium ETF 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.