Correlation Between Polaris Office and Stic Investments

Can any of the company-specific risk be diversified away by investing in both Polaris Office and Stic Investments 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 Polaris Office and Stic Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Polaris Office Corp and Stic Investments, you can compare the effects of market volatilities on Polaris Office and Stic Investments 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 Polaris Office with a short position of Stic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polaris Office and Stic Investments.

Diversification Opportunities for Polaris Office and Stic Investments

0.12

Correlation Coefficient

Polaris Office  Stic Investments

Average diversification

The 3 months correlation between Polaris and Stic is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Office Corp and Stic Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stic Investments and Polaris Office 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 Polaris Office Corp are associated (or correlated) with Stic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stic Investments has no effect on the direction of Polaris Office i.e., Polaris Office and Stic Investments go up and down completely randomly.

Pair Corralation between Polaris Office and Stic Investments

Assuming the 90 days trading horizon Polaris Office Corp is expected to generate 1.72 times more return on investment than Stic Investments. However, Polaris Office is 1.72 times more volatile than Stic Investments. It trades about 0.01 of its potential returns per unit of risk. Stic Investments is currently generating about 0.0 per unit of risk. If you would invest  552,000  in Polaris Office Corp on December 25, 2024 and sell it today you would lose (13,000) from holding Polaris Office Corp or give up 2.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Polaris Office Corp  vs.  Stic Investments

Polaris Office Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polaris Office Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Polaris Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stic Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stic Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Stic Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Polaris Office and Stic Investments

The main advantage of trading using opposite Polaris Office and Stic Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polaris Office position performs unexpectedly, Stic Investments 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 Stic Investments will offset losses from the drop in Stic Investments' long position.

The idea behind Polaris Office Corp and Stic Investments 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.