Correlation Between Foschini and Growthpoint Properties

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

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

Diversification Opportunities for Foschini and Growthpoint Properties

-0.51

Correlation Coefficient

Foschini  Growthpoint Properties

Excellent diversification

The 3 months correlation between Foschini and Growthpoint is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Foschini Group and Growthpoint Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growthpoint Properties and Foschini 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 Foschini Group are associated (or correlated) with Growthpoint Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growthpoint Properties has no effect on the direction of Foschini i.e., Foschini and Growthpoint Properties go up and down completely randomly.

Pair Corralation between Foschini and Growthpoint Properties

Assuming the 90 days trading horizon Foschini Group is expected to generate 1.69 times more return on investment than Growthpoint Properties. However, Foschini is 1.69 times more volatile than Growthpoint Properties. It trades about 0.15 of its potential returns per unit of risk. Growthpoint Properties is currently generating about -0.03 per unit of risk. If you would invest  1,432,500  in Foschini Group on September 3, 2024 and sell it today you would earn a total of  272,100  from holding Foschini Group or generate 18.99% return on investment over 90 days.

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

Foschini Group  vs.  Growthpoint Properties

Foschini Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Foschini Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Foschini exhibited solid returns over the last few months and may actually be approaching a breakup point.

Growthpoint Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Growthpoint Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Growthpoint Properties is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Foschini and Growthpoint Properties

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

The idea behind Foschini Group and Growthpoint Properties 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.