Correlation Between S P and Generic Engineering

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

Diversification Opportunities for S P and Generic Engineering

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between SPAL and Generic is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding S P Apparels and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering and S P 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 S P Apparels are associated (or correlated) with Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of S P i.e., S P and Generic Engineering go up and down completely randomly.

Pair Corralation between S P and Generic Engineering

Assuming the 90 days trading horizon S P Apparels is expected to under-perform the Generic Engineering. But the stock apears to be less risky and, when comparing its historical volatility, S P Apparels is 1.22 times less risky than Generic Engineering. The stock trades about -0.18 of its potential returns per unit of risk. The Generic Engineering Construction is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,094  in Generic Engineering Construction on October 29, 2024 and sell it today you would lose (275.00) from holding Generic Engineering Construction or give up 6.72% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

S P Apparels  vs.  Generic Engineering Constructi

 Performance 
       Timeline  
S P Apparels 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days S P Apparels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, S P is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Generic Engineering 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Generic Engineering is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

S P and Generic Engineering Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with S P and Generic Engineering

The main advantage of trading using opposite S P and Generic Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S P position performs unexpectedly, Generic Engineering 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 Generic Engineering will offset losses from the drop in Generic Engineering's long position.
The idea behind S P Apparels and Generic Engineering Construction 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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