Correlation Between Superior Plus and Impact ISR

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Can any of the company-specific risk be diversified away by investing in both Superior Plus and Impact ISR 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 Superior Plus and Impact ISR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Superior Plus Corp and Impact ISR Performance, you can compare the effects of market volatilities on Superior Plus and Impact ISR 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 Superior Plus with a short position of Impact ISR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Impact ISR.

Diversification Opportunities for Superior Plus and Impact ISR

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Superior and Impact is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Impact ISR Performance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impact ISR Performance and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Impact ISR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impact ISR Performance has no effect on the direction of Superior Plus i.e., Superior Plus and Impact ISR go up and down completely randomly.

Pair Corralation between Superior Plus and Impact ISR

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Impact ISR. In addition to that, Superior Plus is 7.63 times more volatile than Impact ISR Performance. It trades about -0.09 of its total potential returns per unit of risk. Impact ISR Performance is currently generating about -0.29 per unit of volatility. If you would invest  5,459  in Impact ISR Performance on August 25, 2024 and sell it today you would lose (223.00) from holding Impact ISR Performance or give up 4.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

Superior Plus Corp  vs.  Impact ISR Performance

 Performance 
       Timeline  
Superior Plus Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Impact ISR Performance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Impact ISR Performance has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable basic indicators, Impact ISR is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Superior Plus and Impact ISR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Superior Plus and Impact ISR

The main advantage of trading using opposite Superior Plus and Impact ISR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus position performs unexpectedly, Impact ISR 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 Impact ISR will offset losses from the drop in Impact ISR's long position.
The idea behind Superior Plus Corp and Impact ISR Performance 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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