Correlation Between Netcare and Coronation Smaller

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

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

Diversification Opportunities for Netcare and Coronation Smaller

0.69

Correlation Coefficient

Netcare  Coronation Smaller

Poor diversification

The 3 months correlation between Netcare and Coronation is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Netcare and Coronation Smaller Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Smaller and Netcare 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 Netcare are associated (or correlated) with Coronation Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Smaller has no effect on the direction of Netcare i.e., Netcare and Coronation Smaller go up and down completely randomly.

Pair Corralation between Netcare and Coronation Smaller

Assuming the 90 days trading horizon Netcare is expected to generate 1.94 times more return on investment than Coronation Smaller. However, Netcare is 1.94 times more volatile than Coronation Smaller Companies. It trades about 0.14 of its potential returns per unit of risk. Coronation Smaller Companies is currently generating about 0.2 per unit of risk. If you would invest  133,500  in Netcare on September 5, 2024 and sell it today you would earn a total of  14,600  from holding Netcare or generate 10.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Netcare  vs.  Coronation Smaller Companies

Netcare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netcare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Netcare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Coronation Smaller

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Smaller Companies are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly weak basic indicators, Coronation Smaller may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Netcare and Coronation Smaller

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

The idea behind Netcare and Coronation Smaller Companies 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.