Correlation Between Spencers Retail and Cyient

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

Diversification Opportunities for Spencers Retail and Cyient

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Spencers and Cyient is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Cyient Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyient Limited and Spencers Retail 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 Spencers Retail Limited are associated (or correlated) with Cyient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyient Limited has no effect on the direction of Spencers Retail i.e., Spencers Retail and Cyient go up and down completely randomly.

Pair Corralation between Spencers Retail and Cyient

Assuming the 90 days trading horizon Spencers Retail is expected to generate 1.14 times less return on investment than Cyient. In addition to that, Spencers Retail is 1.66 times more volatile than Cyient Limited. It trades about 0.02 of its total potential returns per unit of risk. Cyient Limited is currently generating about 0.05 per unit of volatility. If you would invest  170,235  in Cyient Limited on August 30, 2024 and sell it today you would earn a total of  15,545  from holding Cyient Limited or generate 9.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.19%
ValuesDaily Returns

Spencers Retail Limited  vs.  Cyient Limited

 Performance 
       Timeline  
Spencers Retail 

Risk-Adjusted Performance

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Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
Cyient Limited 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Cyient Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Cyient is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Spencers Retail and Cyient Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Spencers Retail and Cyient

The main advantage of trading using opposite Spencers Retail and Cyient positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spencers Retail position performs unexpectedly, Cyient 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 Cyient will offset losses from the drop in Cyient's long position.
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The idea behind Spencers Retail Limited and Cyient Limited 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.
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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