Correlation Between River and Sydbank
Can any of the company-specific risk be diversified away by investing in both River and Sydbank 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 River and Sydbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River and Mercantile and Sydbank, you can compare the effects of market volatilities on River and Sydbank 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 River with a short position of Sydbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of River and Sydbank.
Diversification Opportunities for River and Sydbank
Very weak diversification
The 3 months correlation between River and Sydbank is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Sydbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank and River 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 River and Mercantile are associated (or correlated) with Sydbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank has no effect on the direction of River i.e., River and Sydbank go up and down completely randomly.
Pair Corralation between River and Sydbank
Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the Sydbank. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 3.34 times less risky than Sydbank. The stock trades about -0.07 of its potential returns per unit of risk. The Sydbank is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 35,260 in Sydbank on October 23, 2024 and sell it today you would earn a total of 2,870 from holding Sydbank or generate 8.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
River and Mercantile vs. Sydbank
Performance |
| Timeline |
| River and Mercantile |
| Sydbank |
River and Sydbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River and Sydbank
The main advantage of trading using opposite River and Sydbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River position performs unexpectedly, Sydbank 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 Sydbank will offset losses from the drop in Sydbank's long position.| River vs. Jupiter Green Investment | River vs. Monks Investment Trust | River vs. Caledonia Investments | River vs. JB Hunt Transport |
| Sydbank vs. Home Depot | Sydbank vs. Weiss Korea Opportunity | Sydbank vs. River and Mercantile | Sydbank vs. Chrysalis Investments |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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