Correlation Between Empire Company and S A P

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

Diversification Opportunities for Empire Company and S A P

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Empire and SAP is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Empire Company Limited and Saputo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saputo Inc and Empire Company 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 Empire Company Limited are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saputo Inc has no effect on the direction of Empire Company i.e., Empire Company and S A P go up and down completely randomly.

Pair Corralation between Empire Company and S A P

Assuming the 90 days trading horizon Empire Company Limited is expected to generate 0.61 times more return on investment than S A P. However, Empire Company Limited is 1.64 times less risky than S A P. It trades about -0.17 of its potential returns per unit of risk. Saputo Inc is currently generating about -0.12 per unit of risk. If you would invest  4,400  in Empire Company Limited on November 3, 2024 and sell it today you would lose (126.00) from holding Empire Company Limited or give up 2.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Empire Company Limited  vs.  Saputo Inc

 Performance 
       Timeline  
Empire Limited 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Empire Company Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empire Company is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Saputo Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Saputo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Empire Company and S A P Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Empire Company and S A P

The main advantage of trading using opposite Empire Company and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Company position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.
The idea behind Empire Company Limited and Saputo Inc 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.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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