Correlation Between SPAR and Bid
Can any of the company-specific risk be diversified away by investing in both SPAR and Bid 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 SPAR and Bid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPAR Group and Bid Corporation, you can compare the effects of market volatilities on SPAR and Bid 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 SPAR with a short position of Bid. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPAR and Bid.
Diversification Opportunities for SPAR and Bid
Good diversification
The 3 months correlation between SPAR and Bid is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SPAR Group and Bid Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bid Corporation and SPAR 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 SPAR Group are associated (or correlated) with Bid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bid Corporation has no effect on the direction of SPAR i.e., SPAR and Bid go up and down completely randomly.
Pair Corralation between SPAR and Bid
Assuming the 90 days trading horizon SPAR Group is expected to generate 1.31 times more return on investment than Bid. However, SPAR is 1.31 times more volatile than Bid Corporation. It trades about 0.06 of its potential returns per unit of risk. Bid Corporation is currently generating about 0.02 per unit of risk. If you would invest 1,003,600 in SPAR Group on September 1, 2024 and sell it today you would earn a total of 431,100 from holding SPAR Group or generate 42.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
SPAR Group vs. Bid Corp.
Performance |
| Timeline |
| SPAR Group |
| Bid Corporation |
SPAR and Bid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPAR and Bid
The main advantage of trading using opposite SPAR and Bid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPAR position performs unexpectedly, Bid 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 Bid will offset losses from the drop in Bid's long position.The idea behind SPAR Group and Bid Corporation 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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