Correlation Between Design and Snet Systems

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

By analyzing existing cross correlation between Design Co and Snet systems, you can compare the effects of market volatilities on Design and Snet Systems 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 Design with a short position of Snet Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Design and Snet Systems.

Diversification Opportunities for Design and Snet Systems

-0.53

Correlation Coefficient

Design  Snet Systems

Excellent diversification

The 3 months correlation between Design and Snet is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Design Co and Snet systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snet systems and Design 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 Design Co are associated (or correlated) with Snet Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snet systems has no effect on the direction of Design i.e., Design and Snet Systems go up and down completely randomly.

Pair Corralation between Design and Snet Systems

Assuming the 90 days trading horizon Design Co is expected to under-perform the Snet Systems. In addition to that, Design is 2.14 times more volatile than Snet systems. It trades about -0.13 of its total potential returns per unit of risk. Snet systems is currently generating about 0.1 per unit of volatility. If you would invest  367,500  in Snet systems on September 23, 2024 and sell it today you would earn a total of  46,500  from holding Snet systems or generate 12.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

Design Co  vs.  Snet systems

Design

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Design Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Snet systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Snet systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Snet Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Design and Snet Systems

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

The idea behind Design Co and Snet systems 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.