Correlation Between Polar Capital and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both Polar Capital and Sovereign Metals 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 Polar Capital and Sovereign Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polar Capital Technology and Sovereign Metals, you can compare the effects of market volatilities on Polar Capital and Sovereign Metals 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 Polar Capital with a short position of Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polar Capital and Sovereign Metals.
Diversification Opportunities for Polar Capital and Sovereign Metals
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Polar and Sovereign is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and Polar Capital 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 Polar Capital Technology are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Polar Capital i.e., Polar Capital and Sovereign Metals go up and down completely randomly.
Pair Corralation between Polar Capital and Sovereign Metals
Assuming the 90 days trading horizon Polar Capital is expected to generate 1.79 times less return on investment than Sovereign Metals. But when comparing it to its historical volatility, Polar Capital Technology is 1.97 times less risky than Sovereign Metals. It trades about 0.11 of its potential returns per unit of risk. Sovereign Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,300 in Sovereign Metals on August 26, 2024 and sell it today you would earn a total of 1,900 from holding Sovereign Metals or generate 82.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Polar Capital Technology vs. Sovereign Metals
Performance |
| Timeline |
| Polar Capital Technology |
| Sovereign Metals |
Polar Capital and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Polar Capital and Sovereign Metals
The main advantage of trading using opposite Polar Capital and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polar Capital position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.| Polar Capital vs. Catalyst Media Group | Polar Capital vs. Oncimmune Holdings plc | Polar Capital vs. Invesco Health Care | Polar Capital vs. Coor Service Management |
| Sovereign Metals vs. Albion Technology General | Sovereign Metals vs. Polar Capital Technology | Sovereign Metals vs. Zurich Insurance Group | Sovereign Metals vs. Check Point Software |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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