Correlation Between SPACE and Highstreet
Can any of the company-specific risk be diversified away by investing in both SPACE and Highstreet 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 SPACE and Highstreet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPACE and Highstreet, you can compare the effects of market volatilities on SPACE and Highstreet 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 SPACE with a short position of Highstreet. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPACE and Highstreet.
Diversification Opportunities for SPACE and Highstreet
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPACE and Highstreet is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Highstreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highstreet and SPACE 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 SPACE are associated (or correlated) with Highstreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highstreet has no effect on the direction of SPACE i.e., SPACE and Highstreet go up and down completely randomly.
Pair Corralation between SPACE and Highstreet
Assuming the 90 days horizon SPACE is expected to generate 3.02 times less return on investment than Highstreet. But when comparing it to its historical volatility, SPACE is 1.05 times less risky than Highstreet. It trades about 0.05 of its potential returns per unit of risk. Highstreet is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 132.00 in Highstreet on September 20, 2024 and sell it today you would earn a total of 27.00 from holding Highstreet or generate 20.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPACE vs. Highstreet
Performance |
| Timeline |
| SPACE |
| Highstreet |
SPACE and Highstreet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPACE and Highstreet
The main advantage of trading using opposite SPACE and Highstreet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE position performs unexpectedly, Highstreet 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 Highstreet will offset losses from the drop in Highstreet's long position.The idea behind SPACE and Highstreet 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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