Correlation Between Sports Gear and New Era
Can any of the company-specific risk be diversified away by investing in both Sports Gear and New Era 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 Sports Gear and New Era into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sports Gear Co and New Era Electronics, you can compare the effects of market volatilities on Sports Gear and New Era 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 Sports Gear with a short position of New Era. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Gear and New Era.
Diversification Opportunities for Sports Gear and New Era
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sports and New is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and New Era Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Electronics and Sports Gear 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 Sports Gear Co are associated (or correlated) with New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Electronics has no effect on the direction of Sports Gear i.e., Sports Gear and New Era go up and down completely randomly.
Pair Corralation between Sports Gear and New Era
Assuming the 90 days trading horizon Sports Gear Co is expected to generate 1.01 times more return on investment than New Era. However, Sports Gear is 1.01 times more volatile than New Era Electronics. It trades about 0.19 of its potential returns per unit of risk. New Era Electronics is currently generating about -0.22 per unit of risk. If you would invest 12,250 in Sports Gear Co on October 25, 2024 and sell it today you would earn a total of 1,350 from holding Sports Gear Co or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sports Gear Co vs. New Era Electronics
Performance |
| Timeline |
| Sports Gear |
| New Era Electronics |
Sports Gear and New Era Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sports Gear and New Era
The main advantage of trading using opposite Sports Gear and New Era positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sports Gear position performs unexpectedly, New Era 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 New Era will offset losses from the drop in New Era's long position.| Sports Gear vs. Sunny Friend Environmental | Sports Gear vs. Cleanaway Co | Sports Gear vs. Charoen Pokphand Enterprise | Sports Gear vs. TTET Union Corp |
| New Era vs. SS Healthcare Holding | New Era vs. Xxentria Technology Materials | New Era vs. Onyx Healthcare | New Era vs. Fulin Plastic Industry |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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