Correlation Between Sage Group and Somero Enterprise
Can any of the company-specific risk be diversified away by investing in both Sage Group and Somero Enterprise 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 Sage Group and Somero Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sage Group PLC and Somero Enterprise, you can compare the effects of market volatilities on Sage Group and Somero Enterprise 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 Sage Group with a short position of Somero Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Group and Somero Enterprise.
Diversification Opportunities for Sage Group and Somero Enterprise
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sage and Somero is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sage Group PLC and Somero Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Somero Enterprise and Sage Group 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 Sage Group PLC are associated (or correlated) with Somero Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Somero Enterprise has no effect on the direction of Sage Group i.e., Sage Group and Somero Enterprise go up and down completely randomly.
Pair Corralation between Sage Group and Somero Enterprise
Assuming the 90 days trading horizon Sage Group is expected to generate 1.24 times less return on investment than Somero Enterprise. But when comparing it to its historical volatility, Sage Group PLC is 2.57 times less risky than Somero Enterprise. It trades about 0.23 of its potential returns per unit of risk. Somero Enterprise is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 30,600 in Somero Enterprise on October 21, 2024 and sell it today you would earn a total of 1,100 from holding Somero Enterprise or generate 3.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sage Group PLC vs. Somero Enterprise
Performance |
| Timeline |
| Sage Group PLC |
| Somero Enterprise |
Sage Group and Somero Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sage Group and Somero Enterprise
The main advantage of trading using opposite Sage Group and Somero Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Group position performs unexpectedly, Somero Enterprise 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 Somero Enterprise will offset losses from the drop in Somero Enterprise's long position.| Sage Group vs. Berkshire Hathaway | Sage Group vs. Samsung Electronics Co | Sage Group vs. Samsung Electronics Co | Sage Group vs. Chocoladefabriken Lindt Spruengli |
| Somero Enterprise vs. National Beverage Corp | Somero Enterprise vs. Monster Beverage Corp | Somero Enterprise vs. Heavitree Brewery | Somero Enterprise vs. Baker Steel Resources |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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