Correlation Between Mix Telemats and Karooooo

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

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

Diversification Opportunities for Mix Telemats and Karooooo

-0.42

Correlation Coefficient

Mix Telemats  Karooooo

Very good diversification

The 3 months correlation between Mix and Karooooo is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mix Telemats and Karooooo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karooooo and Mix Telemats 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 Mix Telemats are associated (or correlated) with Karooooo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karooooo has no effect on the direction of Mix Telemats i.e., Mix Telemats and Karooooo go up and down completely randomly.

Pair Corralation between Mix Telemats and Karooooo

Given the investment horizon of 90 days Mix Telemats is expected to generate 5.45 times less return on investment than Karooooo. But when comparing it to its historical volatility, Mix Telemats is 1.22 times less risky than Karooooo. It trades about 0.01 of its potential returns per unit of risk. Karooooo is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,235  in Karooooo on September 19, 2024 and sell it today you would earn a total of  2,389  from holding Karooooo or generate 106.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.63%
Values	Daily Returns

Mix Telemats  vs.  Karooooo

Mix Telemats

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mix Telemats has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mix Telemats is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Karooooo

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karooooo are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Karooooo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mix Telemats and Karooooo

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

The idea behind Mix Telemats and Karooooo 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.