Correlation Between North East and S P
Can any of the company-specific risk be diversified away by investing in both North East and S 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 North East and S P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North East Rubbers and S P V, you can compare the effects of market volatilities on North East and S 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 North East with a short position of S P. Check out your portfolio center. Please also check ongoing floating volatility patterns of North East and S P.
Diversification Opportunities for North East and S P
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and SPVI is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding North East Rubbers and S P V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S P V and North East 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 North East Rubbers are associated (or correlated) with S P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S P V has no effect on the direction of North East i.e., North East and S P go up and down completely randomly.
Pair Corralation between North East and S P
Assuming the 90 days trading horizon North East Rubbers is expected to generate 0.36 times more return on investment than S P. However, North East Rubbers is 2.78 times less risky than S P. It trades about -0.15 of its potential returns per unit of risk. S P V is currently generating about -0.34 per unit of risk. If you would invest 500.00 in North East Rubbers on September 2, 2024 and sell it today you would lose (16.00) from holding North East Rubbers or give up 3.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North East Rubbers vs. S P V
Performance |
| Timeline |
| North East Rubbers |
| S P V |
North East and S P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North East and S P
The main advantage of trading using opposite North East and S P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North East position performs unexpectedly, S 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 P will offset losses from the drop in S P's long position.| North East vs. Sri Trang Agro Industry | North East vs. Jay Mart Public | North East vs. Com7 PCL | North East vs. Energy Absolute Public |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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