Correlation Between Change Financial and Sports Entertainment
Can any of the company-specific risk be diversified away by investing in both Change Financial and Sports Entertainment 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 Change Financial and Sports Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Change Financial Limited and Sports Entertainment Group, you can compare the effects of market volatilities on Change Financial and Sports Entertainment 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 Change Financial with a short position of Sports Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Change Financial and Sports Entertainment.
Diversification Opportunities for Change Financial and Sports Entertainment
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Change and Sports is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Change Financial Limited and Sports Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Entertainment and Change Financial 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 Change Financial Limited are associated (or correlated) with Sports Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Entertainment has no effect on the direction of Change Financial i.e., Change Financial and Sports Entertainment go up and down completely randomly.
Pair Corralation between Change Financial and Sports Entertainment
Assuming the 90 days trading horizon Change Financial Limited is expected to under-perform the Sports Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Change Financial Limited is 1.24 times less risky than Sports Entertainment. The stock trades about -0.11 of its potential returns per unit of risk. The Sports Entertainment Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 25.00 in Sports Entertainment Group on October 14, 2024 and sell it today you would lose (3.00) from holding Sports Entertainment Group or give up 12.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Change Financial Limited vs. Sports Entertainment Group
Performance |
| Timeline |
| Change Financial |
| Sports Entertainment |
Change Financial and Sports Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Change Financial and Sports Entertainment
The main advantage of trading using opposite Change Financial and Sports Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Change Financial position performs unexpectedly, Sports Entertainment 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 Sports Entertainment will offset losses from the drop in Sports Entertainment's long position.| Change Financial vs. Sports Entertainment Group | Change Financial vs. Janison Education Group | Change Financial vs. Ras Technology Holdings | Change Financial vs. Aristocrat Leisure |
| Sports Entertainment vs. Duketon Mining | Sports Entertainment vs. Retail Food Group | Sports Entertainment vs. DMC Mining | Sports Entertainment vs. Globe Metals Mining |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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