Correlation Between Sui and RUFF
Can any of the company-specific risk be diversified away by investing in both Sui and RUFF 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 Sui and RUFF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sui and RUFF, you can compare the effects of market volatilities on Sui and RUFF 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 Sui with a short position of RUFF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sui and RUFF.
Diversification Opportunities for Sui and RUFF
Poor diversification
The 3 months correlation between Sui and RUFF is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sui and RUFF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RUFF and Sui 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 Sui are associated (or correlated) with RUFF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RUFF has no effect on the direction of Sui i.e., Sui and RUFF go up and down completely randomly.
Pair Corralation between Sui and RUFF
Assuming the 90 days trading horizon Sui is expected to generate 0.47 times more return on investment than RUFF. However, Sui is 2.14 times less risky than RUFF. It trades about 0.16 of its potential returns per unit of risk. RUFF is currently generating about 0.06 per unit of risk. If you would invest 106.00 in Sui on August 27, 2024 and sell it today you would earn a total of 238.00 from holding Sui or generate 224.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sui vs. RUFF
Performance |
| Timeline |
| Sui |
| RUFF |
Sui and RUFF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sui and RUFF
The main advantage of trading using opposite Sui and RUFF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sui position performs unexpectedly, RUFF 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 RUFF will offset losses from the drop in RUFF's long position.The idea behind Sui and RUFF 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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