Correlation Between Sports Gear and Giant Manufacturing
Can any of the company-specific risk be diversified away by investing in both Sports Gear and Giant Manufacturing 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 Giant Manufacturing 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 Giant Manufacturing Co, you can compare the effects of market volatilities on Sports Gear and Giant Manufacturing 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 Giant Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Gear and Giant Manufacturing.
Diversification Opportunities for Sports Gear and Giant Manufacturing
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sports and Giant is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing 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 Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Sports Gear i.e., Sports Gear and Giant Manufacturing go up and down completely randomly.
Pair Corralation between Sports Gear and Giant Manufacturing
Assuming the 90 days trading horizon Sports Gear Co is expected to generate 1.04 times more return on investment than Giant Manufacturing. However, Sports Gear is 1.04 times more volatile than Giant Manufacturing Co. It trades about 0.16 of its potential returns per unit of risk. Giant Manufacturing Co is currently generating about -0.03 per unit of risk. If you would invest 6,429 in Sports Gear Co on August 25, 2024 and sell it today you would earn a total of 8,321 from holding Sports Gear Co or generate 129.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sports Gear Co vs. Giant Manufacturing Co
Performance |
| Timeline |
| Sports Gear |
| Giant Manufacturing |
Sports Gear and Giant Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sports Gear and Giant Manufacturing
The main advantage of trading using opposite Sports Gear and Giant Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sports Gear position performs unexpectedly, Giant Manufacturing 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 Giant Manufacturing will offset losses from the drop in Giant Manufacturing's long position.| Sports Gear vs. Giant Manufacturing Co | Sports Gear vs. Johnson Health Tech | Sports Gear vs. Power Wind Health |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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