Correlation Between SPORTING and National Grid
Can any of the company-specific risk be diversified away by investing in both SPORTING and National Grid 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 SPORTING and National Grid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPORTING and National Grid plc, you can compare the effects of market volatilities on SPORTING and National Grid 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 SPORTING with a short position of National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORTING and National Grid.
Diversification Opportunities for SPORTING and National Grid
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPORTING and National is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING and National Grid plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid plc and SPORTING 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 SPORTING are associated (or correlated) with National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid plc has no effect on the direction of SPORTING i.e., SPORTING and National Grid go up and down completely randomly.
Pair Corralation between SPORTING and National Grid
Assuming the 90 days trading horizon SPORTING is expected to generate 1.07 times less return on investment than National Grid. In addition to that, SPORTING is 1.11 times more volatile than National Grid plc. It trades about 0.03 of its total potential returns per unit of risk. National Grid plc is currently generating about 0.04 per unit of volatility. If you would invest 4,753 in National Grid plc on September 12, 2024 and sell it today you would earn a total of 947.00 from holding National Grid plc or generate 19.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPORTING vs. National Grid plc
Performance |
| Timeline |
| SPORTING |
| National Grid plc |
SPORTING and National Grid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPORTING and National Grid
The main advantage of trading using opposite SPORTING and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORTING position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.| SPORTING vs. TAL Education Group | SPORTING vs. PARKEN Sport Entertainment | SPORTING vs. Adtalem Global Education | SPORTING vs. DEVRY EDUCATION GRP |
| National Grid vs. SPORT LISBOA E | National Grid vs. USWE SPORTS AB | National Grid vs. CSSC Offshore Marine | National Grid vs. SPORTING |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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