Correlation Between Salfacorp and Weg ADM

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Can any of the company-specific risk be diversified away by investing in both Salfacorp and Weg ADM 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 Salfacorp and Weg ADM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Salfacorp and Weg ADM General, you can compare the effects of market volatilities on Salfacorp and Weg ADM 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 Salfacorp with a short position of Weg ADM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salfacorp and Weg ADM.

Diversification Opportunities for Salfacorp and Weg ADM

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Salfacorp and Weg is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Salfacorp and Weg ADM General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weg ADM General and Salfacorp 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 Salfacorp are associated (or correlated) with Weg ADM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weg ADM General has no effect on the direction of Salfacorp i.e., Salfacorp and Weg ADM go up and down completely randomly.

Pair Corralation between Salfacorp and Weg ADM

Assuming the 90 days trading horizon Salfacorp is expected to under-perform the Weg ADM. In addition to that, Salfacorp is 1.17 times more volatile than Weg ADM General. It trades about -0.2 of its total potential returns per unit of risk. Weg ADM General is currently generating about -0.18 per unit of volatility. If you would invest  143,952  in Weg ADM General on August 28, 2024 and sell it today you would lose (3,952) from holding Weg ADM General or give up 2.75% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.0%
ValuesDaily Returns

Salfacorp  vs.  Weg ADM General

 Performance 
       Timeline  
Salfacorp 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Salfacorp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.
Weg ADM General 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Weg ADM General has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong technical and fundamental indicators, Weg ADM is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Salfacorp and Weg ADM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Salfacorp and Weg ADM

The main advantage of trading using opposite Salfacorp and Weg ADM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salfacorp position performs unexpectedly, Weg ADM 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 Weg ADM will offset losses from the drop in Weg ADM's long position.
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The idea behind Salfacorp and Weg ADM General 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.
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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