Correlation Between Superior Plus and Big Yellow
Can any of the company-specific risk be diversified away by investing in both Superior Plus and Big Yellow 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 Big Yellow 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 Big Yellow Group, you can compare the effects of market volatilities on Superior Plus and Big Yellow 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 Big Yellow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Big Yellow.
Diversification Opportunities for Superior Plus and Big Yellow
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Superior and Big is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Big Yellow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Yellow Group 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 Big Yellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Yellow Group has no effect on the direction of Superior Plus i.e., Superior Plus and Big Yellow go up and down completely randomly.
Pair Corralation between Superior Plus and Big Yellow
Assuming the 90 days horizon Superior Plus Corp is expected to generate 2.39 times more return on investment than Big Yellow. However, Superior Plus is 2.39 times more volatile than Big Yellow Group. It trades about -0.04 of its potential returns per unit of risk. Big Yellow Group is currently generating about -0.14 per unit of risk. If you would invest 482.00 in Superior Plus Corp on September 4, 2024 and sell it today you would lose (54.00) from holding Superior Plus Corp or give up 11.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Superior Plus Corp vs. Big Yellow Group
Performance |
| Timeline |
| Superior Plus Corp |
| Big Yellow Group |
Superior Plus and Big Yellow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Superior Plus and Big Yellow
The main advantage of trading using opposite Superior Plus and Big Yellow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus position performs unexpectedly, Big Yellow 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 Big Yellow will offset losses from the drop in Big Yellow's long position.| Superior Plus vs. Food Life Companies | Superior Plus vs. Mitsubishi Materials | Superior Plus vs. United Natural Foods | Superior Plus vs. NEWELL RUBBERMAID |
| Big Yellow vs. Larsen Toubro Limited | Big Yellow vs. China Railway Group | Big Yellow vs. China Communications Construction | Big Yellow vs. Superior Plus Corp |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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