Correlation Between Basic Materials and SRXM34
Can any of the company-specific risk be diversified away by investing in both Basic Materials and SRXM34 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 Basic Materials and SRXM34 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and SRXM34, you can compare the effects of market volatilities on Basic Materials and SRXM34 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 Basic Materials with a short position of SRXM34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and SRXM34.
Diversification Opportunities for Basic Materials and SRXM34
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Basic and SRXM34 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and SRXM34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SRXM34 and Basic Materials 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 Basic Materials are associated (or correlated) with SRXM34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SRXM34 has no effect on the direction of Basic Materials i.e., Basic Materials and SRXM34 go up and down completely randomly.
Pair Corralation between Basic Materials and SRXM34
Assuming the 90 days trading horizon Basic Materials is expected to generate 1.62 times less return on investment than SRXM34. But when comparing it to its historical volatility, Basic Materials is 4.34 times less risky than SRXM34. It trades about 0.0 of its potential returns per unit of risk. SRXM34 is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,977 in SRXM34 on September 20, 2024 and sell it today you would lose (1,202) from holding SRXM34 or give up 40.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Basic Materials vs. SRXM34
Performance |
| Timeline |
Basic Materials and SRXM34 Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
SRXM34
Pair trading matchups for SRXM34
Pair Trading with Basic Materials and SRXM34
The main advantage of trading using opposite Basic Materials and SRXM34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, SRXM34 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 SRXM34 will offset losses from the drop in SRXM34's long position.| Basic Materials vs. Multilaser Industrial SA | Basic Materials vs. Marvell Technology | Basic Materials vs. Micron Technology | Basic Materials vs. Waste Management |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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