Correlation Between Plandai Biotech and Sanwire

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

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

Diversification Opportunities for Plandai Biotech and Sanwire

0.14

Correlation Coefficient

Plandai Biotech  Sanwire

Average diversification

The 3 months correlation between Plandai and Sanwire is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Plandai Biotech and Sanwire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanwire and Plandai Biotech 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 Plandai Biotech are associated (or correlated) with Sanwire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanwire has no effect on the direction of Plandai Biotech i.e., Plandai Biotech and Sanwire go up and down completely randomly.

Pair Corralation between Plandai Biotech and Sanwire

Given the investment horizon of 90 days Plandai Biotech is expected to generate 4.22 times more return on investment than Sanwire. However, Plandai Biotech is 4.22 times more volatile than Sanwire. It trades about 0.22 of its potential returns per unit of risk. Sanwire is currently generating about -0.04 per unit of risk. If you would invest  0.01  in Plandai Biotech on September 3, 2024 and sell it today you would earn a total of  0.01  from holding Plandai Biotech or generate 100.0% return on investment over 90 days.

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

Plandai Biotech  vs.  Sanwire

Plandai Biotech

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plandai Biotech are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Plandai Biotech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sanwire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanwire has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Plandai Biotech and Sanwire

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

The idea behind Plandai Biotech and Sanwire 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 Transaction History module to view history of all your transactions and understand their impact on performance.