Correlation Between HomeChoice Investments and Pan African

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

By analyzing existing cross correlation between HomeChoice Investments and Pan African Resources, you can compare the effects of market volatilities on HomeChoice Investments and Pan African 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 HomeChoice Investments with a short position of Pan African. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeChoice Investments and Pan African.

Diversification Opportunities for HomeChoice Investments and Pan African

0.05

Correlation Coefficient

HomeChoice Investments  Pan African

Significant diversification

The 3 months correlation between HomeChoice and Pan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Pan African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan African Resources and HomeChoice Investments 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 HomeChoice Investments are associated (or correlated) with Pan African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan African Resources has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and Pan African go up and down completely randomly.

Pair Corralation between HomeChoice Investments and Pan African

Assuming the 90 days trading horizon HomeChoice Investments is expected to under-perform the Pan African. In addition to that, HomeChoice Investments is 1.31 times more volatile than Pan African Resources. It trades about -0.05 of its total potential returns per unit of risk. Pan African Resources is currently generating about 0.14 per unit of volatility. If you would invest  69,200  in Pan African Resources on September 5, 2024 and sell it today you would earn a total of  15,600  from holding Pan African Resources or generate 22.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

HomeChoice Investments  vs.  Pan African Resources

HomeChoice Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeChoice Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pan African Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan African Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Pan African exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HomeChoice Investments and Pan African

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

The idea behind HomeChoice Investments and Pan African Resources 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.