Tuesday, 07 May 2013 - 20:00
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Diversification ? Benefits of Low Correlation Everyone has heard that you should have a diversified portfolio, but is your “diversified” portfolio actually providing you with the maximum benefit?
The aim of diversifying your portfolio is to reduce the risk (i.e. volatility) of the portfolio for a certain expected return. The key in diversification is to take into account the correlation between the different components of the portfolio.
The correlation is the statistical measure of how two assets move in relation to one another. If two assets are perfectly positively correlated (ρ=1) they move in lock step, if the one goes up the other will also go up and vice versa. At the other end of spectrum is perfectly negatively correlated assets (ρ=-1), if the one goes up the other goes down. Uncorrelated assets (ρ=0) sit in the middle as there is no relationship between the movements of the two assets.
The graph below shows the risk/return plot of 4 portfolios made up out of two assets with different correlations. Each curve represents the different risk/return combinations dependant on the weight of the securities in the portfolio.
The maximum benefits of correlation are observed when assets are either uncorrelated or negatively correlated with each other. It is possible to create a portfolio where the risk (standard deviation) is less than either of the two assets, with the expected between the two assets.
Another way to look at how diversified your portfolio is, is to look at how the assets react in periods of negative market returns in relation to each other and the market. The assets might have a higher correlation with each other in down periods which reduces the benefit of diversification. At Seed we pay careful attention to how assets react in relation to one another in down markets, as this is when the benefits of diversification are best experienced.
A portfolio will ideally be constructed with assets that have negative or low bear (down market) correlation and high bull (up market) correlation. This will ensure that the portfolio is better at preserving capital in negative periods and delivering good returns in positive periods.
While correlation is an important metric, investors must also make sure that the expected return is acceptable. It is pointless adding a negatively correlated asset to a portfolio when the asset’s expected return is negative in most market environments.
As always, we are available for any questions regarding investment or retirement matters.
Kind regards,
Gerbrandt Kruger
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 07 May 2013
Top News
South African stocks broke a three-day rise on Tuesday, weighed down by share price drops at gold companies such as Gold Fields as investors nervously await economic data from top metals consumer China. Full story
Revenue for the year ended 28 February 2013 soared to R798.4 million (2012: R514.9 million). Gross profit jumped to R148 million (2012: R79.5 million), operating profit more than doubled to R89.4 million (2012: R43.2 million), while profit attributable to equity holders of the company shot u Full story |
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The three Cleveland women found alive after vanishing in their own neighbourhood for about a decade were rescued from a house that authorities tried to visit several years ago, police said on Tuesday. Full storyBritain should leave the European
Union because Prime Minister David Cameron's plan to claw back
powers from Brussels is doomed, a former senior minister said on
Tuesday, stirring divisions that threaten his party's
re-election hopes. Full storyThe U.S. secretary of state sought
Russian help in ending Syria's civil war on Tuesday, telling
President Vladimir Putin in Moscow that common interest in a
stable Middle East could bridge divisions among the big powers. Full story |
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Markets | Robust results from heavyweight
banks drove European shares to fresh peaks on Tuesday, with
Germany's benchmark stock market rising to a record high.. . . Full story | | Major stock indexes in Germany
and the United States hit all-time highs on Tuesday after data
bolstered expectations that Germany has returned to. . . Full story | | U.S. stocks rose on Tuesday,
with the S&P 500 extending its three-day rally to an intraday
high, although profit-taking in technology shares. . . Full story | | A surge in banking shares lifted
Britain's top share index to a 5-1/2 year high on Tuesday after
Europe's largest lender HSBC reported. . . Full story |
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| Gold fell further on Tuesday as
its appeal as an alternative investment faded after equity
markets rose on prospects of sustained central bank. . . Full story | | U.S. stocks pared their early
gains on Tuesday, with the S&P 500 briefly turning negative as
technology shares weighed on the market.. . . Full story | | U.S. stocks edged up on Tuesday
with the S&P 500 setting yet another record, led by gains in
energy and tech sectors.. . . Full story | | A rally in banking shares
propelled Britain's top share index to a 5-1/2 year high on
Tuesday after Europe's largest lender HSBC reported
estimate-beating. . . Full story |
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SA Business | South Africa's rand was on a weaker footing on Tuesday as the country's economic downturn heightens expectations of an interest rate cut.. . . Full story | | Ivory Coast mobile telecoms companies risk losing their licences if they do not improve their poor levels of service, a minister said on Monday.. . . Full story |
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| South Africa's competition
authorities are to investigate the private healthcare industry,
where early evidence points to high charges and market
distortions, a government minister said on Tuesday.. . . Full story | | South Africa's Treasury sold a total 2.35 billion rand of its 2023, 2036 and 2041 government bonds on Tuesday.. . . Full story |
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Company News | Further to the 'Annual Report Release' announcement dated 29 April 2013, shareholders are advised that the notice of the 2013 annual. . . Full story | | Shareholders are advised that the Company has entered into discussions which, if successful, could have a material impact on the Company's. . . Full story | | Shareholders were advised that, for the full year ended 31 March 2013, MiX anticipates earnings per share to be between 21%. . . Full story | | Vukile has closed its accelerated book build. In light of strong demand, the amount of capital to be raised was increased. . . Full story |
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| Further to the Altron cautionary announcement dated 22 March 2013, shareholders are advised that negotiations are still in progress which if. . . Full story | | Shareholders of Implats are referred to the circular to shareholders dated 8 April 2013 relating to the granting and approval of. . . Full story | | Trencor drew attention to the following news release issued by Textainer Group Holdings Ltd., in which Trencor has a 48.5% beneficiary. . . Full story | | Subject to pricing acceptable to Vukile, Vukile proposes an equity raise of about R250 million through the issue of new linked. . . Full story |
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Company Results | Delprop's maiden final results as a listed entity showed contractual rental income of R116.9 million and revenue of R139.9 million. A net loss of R17.3 million was made. In addition, the headline/diluted headline loss per linked unit amounted to 26.70cplu.
Distribution
A. . . Full story | | Transcap's maiden interim results showed interest and other similar income of R1.3 billion. Net attributable profit amounted to R233 million. In addition, headline earnings per share from continuing operations of 39.9cps was recorded.
Dividend
A maiden gross interim dividend of 9cps was. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 39821.48 | -6.00 | -0.02% | JSE Top 40 | 17:00 | 35214.02 | 15.00 | 0.04% | JSE Gold | 17:00 | 1464.97 | -36.00 | -2.40% | JSE Financial | 17:00 | 31222.14 | 83.00 | 0.27% | JSE Industrial | 17:00 | 50908.61 | -61.00 | -0.12% | JSE Indust 25 | 17:00 | 44232.92 | -56.00 | -0.13% | JSE Resource | 17:00 | 45234.52 | -27.00 | -0.06% | DJ Futures | 19:28 | 14978.00 | 72.00 | 0.48% | DJ Ind | 19:58 | 15046.91 | 78.02 | 0.52% | SP 500 | 19:58 | 1625.52 | 8.02 | 0.50% | Nasdaq | 19:58 | 3396.95 | 3.98 | 0.12% | FTSE 100 | 17:35 | 6557.30 | 35.84 | 0.55% | DAX | 18:02 | 8181.78 | 69.70 | 0.86% | CAC40 | 18:02 | 3921.32 | 14.28 | 0.37% | Nikkei | 08:36 | 14180.24 | 486.20 | 3.55% | Shanghai | 09:28 | 2235.57 | 4.41 | 0.20% | Hang-Seng | 10:28 | 23047.09 | 132.00 | 0.58% | All Ords | 08:43 | 5122.70 | -11.10 | -0.22% | NZSE 50 | 07:48 | 4621.73 | 25.50 | 0.55% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1450.40 | -19.17 | -1.30% | Gold R | 19:58 | 13089.46 | 13089.46 | 0.00% | Gold R/kg | 19:58 | 420902 | -3347 | -0.79% | Silver $ | 19:59 | 23.8760 | -.1240 | -0.52% | Platinum $ | 19:59 | 1478.50 | -23.50 | -1.56% | Palladium $ | 19:59 | 679.50 | -13.30 | -1.92% | R157 | 17:24 | 5.08 | -.00 | -0.10% | R186 | 17:27 | 6.72 | .01 | 0.15% | R204 | 17:24 | 5.67 | .00 | 0.00% | R207 | 17:24 | 5.84 | -.00 | -0.09% | Brent Crude | 19:58 | 105.04 | 1.03 | 0.99% | Rand / Dollar | 19:59 | 9.0206 | 0.0393 | 0.44% | Rand / Pound | 19:55 | 13.9403 | 0.0034 | 0.02% | Rand / Euro | 19:55 | 11.8080 | 0.0570 | 0.49% | Rand / NZD | 19:58 | 7.6301 | -0.0175 | -0.23% | Rand / AUD | 19:55 | 9.1875 | -0.0325 | -0.35% | Yen / Dollar | 19:59 | 99.0400 | -0.2650 | -0.27% | Euro / Dollar | 19:55 | 0.7639 | -0.0008 | -0.10% | Dollar / Euro | 19:59 | 1.3085 | 0.0012 | 0.09% | Pound / Dollar | 19:55 | 0.6456 | 0.0024 | 0.37% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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07/05/2013 | 163 | 181 | 78 | 422 | 247,569,548 | R15,954,074,524 | 181255 | 1473403 | 06/05/2013 | 195 | 154 | 77 | 426 | 165,540,728 | R9,566,824,233 | 130921 | 825343 | 03/05/2013 | 208 | 187 | 77 | 472 | 292,593,016 | R17,083,418,756 | 206555 | 1490473 | 02/05/2013 | 218 | 149 | 72 | 439 | 222,611,531 | R15,842,517,519 | 221480 | 1560575 | 30/04/2013 | 151 | 199 | 73 | 423 | 255,898,674 | R15,024,617,262 | 173152 | 1002379 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 35,214.00 | 15.00 | 0.04% | Industrial | 50,908.00 | -61.00 | -0.12% | Mid Cap | 55,787.00 | -209.00 | -0.37% | Small Cap | 44,594.00 | 34.00 | 0.08% | Resource 20 | 45,234.00 | -27.00 | -0.06% | Industrial 25 | 44,232.00 | -56.00 | -0.13% | Financial 15 | 11,605.00 | 59.00 | 0.51% | Financial & Ind. 30 | 47,749.00 | 55.00 | 0.12% | All Share | 39,821.00 | -6.00 | -0.02% | Oil & Gas | 30,387.00 | 80.00 | 0.26% | Mining | 27,856.00 | -27.00 | -0.10% | Gold Mining | 1,464.00 | -36.00 | -2.40% | Platinum Mining | 42.00 | .00 | -0.12% | GENERAL MINING | 7,801.00 | 30.00 | 0.40% | Oil & Gas Producers | 16,338.00 | 43.00 | 0.27% | Basic Materials | 24,448.00 | -12.00 | -0.05% | Chemicals | 19,203.00 | -220.00 | -1.14% | Forestry & Paper | 20,779.00 | -7.00 | -0.04% | Industrial Metals | 24,459.00 | 469.00 | 1.96% | Industrials | 41,877.00 | 82.00 | 0.20% | General Industrials | 126.00 | 1.00 | 0.94% | Consumer Goods | 48,157.00 | 314.00 | 0.66% | Automobiles & Parts | 7,574.00 | .00 | 0.01% | Household Goods | 161.00 | 1 | 0.89% | Health Care | 65,049.00 | -594.00 | -0.91% | Beverages | 171.00 | .00 | 0.24% |
| | Index Name | RP | Move | % Move | Food Producers | 70,443.00 | 308.00 | 0.44% | Personal Goods | 756.00 | 15.00 | 2.09% | Consumer Services | 83,138.00 | -512.00 | -0.61% | General Retailers | 63,612.00 | -92.00 | -0.15% | Travel & Leisure | 5,576.00 | -32.00 | -0.58% | Media | 135.00 | -1.00 | -1.33% | Support Services | 2,341.00 | -10.00 | -0.46% | Telecommunications | 79,276.00 | -1531.00 | -1.90% | Financials | 31,222.00 | 83.00 | 0.27% | Banks | 51,716.00 | 585.00 | 1.14% | Non-life Insurance | 47,981.00 | 638.00 | 1.35% | Life Insurance | 29,162.00 | -12.00 | -0.04% | General Financial | 2,779.00 | -34.00 | -1.24% | Technology | 37,061.00 | 413.00 | 1.13% | SHARIAH TOP40 | 3,220.00 | -1 | -0.04% | FTSE/JSE SHARIAH ALL | 3,365.00 | -2 | -0.08% | COAL MINING | 18,199.00 | -249 | -1.35% | FTSE JSE Fledgling | 5,813.00 | -12 | -0.22% | FTSE/JSE Alt X | 928.00 | 0 | 0.08% | SA LISTED PROPERTY | 577.00 | | 0.01% | CAPPED PROPERTY | 461.00 | | 0.27% | RESOURCE | 24,717.00 | -9 | -0.04% | DIVIDEND PLUS | 207.00 | 0 | 0.00% | FTSE/JSE RAFI 40 | 7,961.00 | -6 | -0.09% | Capped Top 40 | 18,607.00 | -3 | -0.02% | Capped All Share | 20,178.00 | -7 | -0.04% | JSE TABACO | 6,492.00 | -23 | -0.37% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | MTN | MTN GROUP LIMITED | BUY | 06/05/2013 | FSR | FIRSTRAND LIMITED | HOLD | 03/05/2013 | APN | ASPEN PHARMACARE HLDGS | SELL | 03/05/2013 | NED | NEDBANK GROUP LTD | BUY | 03/05/2013 | SBK | STANDARD BANK GROUP LIMIT... | HOLD | 03/05/2013 |
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Results Expected** Expected | Company Name | Fin. Date | 08/05/2013 | ALTRON | February 2013 (Final) | 08/05/2013 | ALTRON PP | February 2013 (Final) | 08/05/2013 | ASTRAPAK | February 2013 (Final) | 08/05/2013 | ASTRAPAKP | February 2013 (Final) | 08/05/2013 | LITHA | March 2013 (Q) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | SBR003 | 06/05/2013 | 26/07/2013 | 05/08/2013 | R 1.3600 | DELPROP | 06/05/2013 | 17/05/2013 | 27/05/2013 | R 0.2369 | REDEFINE | 02/05/2013 | 17/05/2013 | 27/05/2013 | R 0.3370 | REDEFINTL | 29/04/2013 | 17/05/2013 | 27/05/2013 | R 0.0147 | OCTODEC | 25/04/2013 | 10/05/2013 | 20/05/2013 | R 0.7870 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | PSG | 15/04/2013 | 03/05/2013 | 13/05/2013 | R 0.7800 | AMAPS | 12/04/2013 | 03/05/2013 | 13/05/2013 | R 0.3000 |
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Upcoming AGMs** Code | Company Name | Date | Status | RNG | Randgold - Exploration Co Ltd. | 07/05/2013 | Unconfirmed | IFH | IFA Hotels - Resorts Ltd. | 08/05/2013 | Unconfirmed | ZSA | Zurich Insurance Company South Africa Lt... | 08/05/2013 | Confirmed | MMH | Miranda Mineral Holdings Ltd. | 08/05/2013 | Confirmed | GFI | Gold Fields Ltd. | 09/05/2013 | Confirmed |
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