Correlation Between SNET and EM
Can any of the company-specific risk be diversified away by investing in both SNET and EM 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 SNET and EM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SNET and EM, you can compare the effects of market volatilities on SNET and EM 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 SNET with a short position of EM. Check out your portfolio center. Please also check ongoing floating volatility patterns of SNET and EM.
Diversification Opportunities for SNET and EM
Pay attention - limited upside
The 3 months correlation between SNET and EM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SNET and EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EM and SNET 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 SNET are associated (or correlated) with EM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EM has no effect on the direction of SNET i.e., SNET and EM go up and down completely randomly.
Pair Corralation between SNET and EM
Assuming the 90 days trading horizon SNET is expected to generate 6.03 times more return on investment than EM. However, SNET is 6.03 times more volatile than EM. It trades about 0.04 of its potential returns per unit of risk. EM is currently generating about 0.01 per unit of risk. If you would invest 0.16 in SNET on January 14, 2025 and sell it today you would lose (0.10) from holding SNET or give up 63.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SNET vs. EM
Performance |
| Timeline |
| SNET |
| EM |
SNET and EM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SNET and EM
The main advantage of trading using opposite SNET and EM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SNET position performs unexpectedly, EM 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 EM will offset losses from the drop in EM's long position.The idea behind SNET and EM 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.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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |