Correlation Between Supernet and East West

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

Diversification Opportunities for Supernet and East West

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Supernet and East is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Supernet and East West Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Insurance and Supernet 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 Supernet are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Insurance has no effect on the direction of Supernet i.e., Supernet and East West go up and down completely randomly.

Pair Corralation between Supernet and East West

Assuming the 90 days trading horizon Supernet is expected to generate 2.1 times more return on investment than East West. However, Supernet is 2.1 times more volatile than East West Insurance. It trades about 0.07 of its potential returns per unit of risk. East West Insurance is currently generating about -0.1 per unit of risk. If you would invest  1,250  in Supernet on September 4, 2024 and sell it today you would earn a total of  51.00  from holding Supernet or generate 4.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy89.47%
ValuesDaily Returns

Supernet  vs.  East West Insurance

 Performance 
       Timeline  
Supernet 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Supernet are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Supernet disclosed solid returns over the last few months and may actually be approaching a breakup point.
East West Insurance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days East West Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Supernet and East West Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Supernet and East West

The main advantage of trading using opposite Supernet and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Supernet position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.
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The idea behind Supernet and East West Insurance 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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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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