Correlation Between Snap and Six Circles
Can any of the company-specific risk be diversified away by investing in both Snap and Six Circles 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 Snap and Six Circles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Six Circles Unconstrained, you can compare the effects of market volatilities on Snap and Six Circles 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 Snap with a short position of Six Circles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Six Circles.
Diversification Opportunities for Snap and Six Circles
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and Six is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Six Circles Unconstrained in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Circles Unconstrained and Snap 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 Snap Inc are associated (or correlated) with Six Circles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Circles Unconstrained has no effect on the direction of Snap i.e., Snap and Six Circles go up and down completely randomly.
Pair Corralation between Snap and Six Circles
Given the investment horizon of 90 days Snap Inc is expected to generate 4.61 times more return on investment than Six Circles. However, Snap is 4.61 times more volatile than Six Circles Unconstrained. It trades about 0.03 of its potential returns per unit of risk. Six Circles Unconstrained is currently generating about 0.11 per unit of risk. If you would invest 1,010 in Snap Inc on August 24, 2024 and sell it today you would earn a total of 132.00 from holding Snap Inc or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Six Circles Unconstrained
Performance |
| Timeline |
| Snap Inc |
| Six Circles Unconstrained |
Snap and Six Circles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Six Circles
The main advantage of trading using opposite Snap and Six Circles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Six Circles 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 Six Circles will offset losses from the drop in Six Circles' long position.The idea behind Snap Inc and Six Circles Unconstrained 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.| Six Circles vs. Pace Large Growth | Six Circles vs. Rational Strategic Allocation | Six Circles vs. Quantitative U S | Six Circles vs. Legg Mason Bw |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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