Correlation Between SP Global and JSE

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

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

Diversification Opportunities for SP Global and JSE

-0.44

Correlation Coefficient

SP Global  JSE

Very good diversification

The 3 months correlation between SPGI and JSE is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SP Global and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited and SP Global 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 SP Global are associated (or correlated) with JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of SP Global i.e., SP Global and JSE go up and down completely randomly.

Pair Corralation between SP Global and JSE

Given the investment horizon of 90 days SP Global is expected to under-perform the JSE. But the stock apears to be less risky and, when comparing its historical volatility, SP Global is 2.89 times less risky than JSE. The stock trades about -0.04 of its potential returns per unit of risk. The JSE Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  550.00  in JSE Limited on September 25, 2024 and sell it today you would earn a total of  115.00  from holding JSE Limited or generate 20.91% return on investment over 90 days.

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

SP Global  vs.  JSE Limited

SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, SP Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

JSE Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JSE Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, JSE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SP Global and JSE

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

The idea behind SP Global and JSE Limited 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.