Correlation Between Shoprite Holdings and Sphere Entertainment

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

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

Diversification Opportunities for Shoprite Holdings and Sphere Entertainment

-0.72

Correlation Coefficient

Shoprite Holdings  Sphere Entertainment

Pay attention - limited upside

The 3 months correlation between Shoprite and Sphere is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings Limited and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment and Shoprite Holdings 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 Shoprite Holdings Limited are associated (or correlated) with Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Shoprite Holdings i.e., Shoprite Holdings and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Shoprite Holdings and Sphere Entertainment

Assuming the 90 days horizon Shoprite Holdings Limited is expected to generate 0.53 times more return on investment than Sphere Entertainment. However, Shoprite Holdings Limited is 1.9 times less risky than Sphere Entertainment. It trades about 0.07 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about 0.03 per unit of risk. If you would invest  1,456  in Shoprite Holdings Limited on September 24, 2024 and sell it today you would earn a total of  177.00  from holding Shoprite Holdings Limited or generate 12.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	46.18%
Values	Daily Returns

Shoprite Holdings Limited  vs.  Sphere Entertainment Co

Shoprite Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Shoprite Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Shoprite Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Shoprite Holdings and Sphere Entertainment

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

The idea behind Shoprite Holdings Limited and Sphere Entertainment Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.