Correlation Between Netcare and AfricaRhodium ETF

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

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

Diversification Opportunities for Netcare and AfricaRhodium ETF

-0.04

Correlation Coefficient

Netcare  AfricaRhodium ETF

Good diversification

The 3 months correlation between Netcare and AfricaRhodium is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Netcare and AfricaRhodium ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfricaRhodium ETF 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 AfricaRhodium ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfricaRhodium ETF has no effect on the direction of Netcare i.e., Netcare and AfricaRhodium ETF go up and down completely randomly.

Pair Corralation between Netcare and AfricaRhodium ETF

Assuming the 90 days trading horizon Netcare is expected to generate 0.41 times more return on investment than AfricaRhodium ETF. However, Netcare is 2.46 times less risky than AfricaRhodium ETF. It trades about 0.14 of its potential returns per unit of risk. AfricaRhodium ETF is currently generating about -0.02 per unit of risk. If you would invest  135,900  in Netcare on September 13, 2024 and sell it today you would earn a total of  15,600  from holding Netcare or generate 11.48% return on investment over 90 days.

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

Netcare  vs.  AfricaRhodium ETF

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.

AfricaRhodium ETF

Risk-Adjusted Performance

0 of 100

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Netcare and AfricaRhodium ETF

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

The idea behind Netcare and AfricaRhodium ETF 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.