Correlation Between Newretail and Simple Mart

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

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

Diversification Opportunities for Newretail and Simple Mart

-0.29

Correlation Coefficient

Newretail  Simple Mart

Very good diversification

The 3 months correlation between Newretail and Simple is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and Simple Mart Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simple Mart Retail and Newretail 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 Newretail Co are associated (or correlated) with Simple Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simple Mart Retail has no effect on the direction of Newretail i.e., Newretail and Simple Mart go up and down completely randomly.

Pair Corralation between Newretail and Simple Mart

Assuming the 90 days trading horizon Newretail Co is expected to under-perform the Simple Mart. In addition to that, Newretail is 2.95 times more volatile than Simple Mart Retail. It trades about -0.05 of its total potential returns per unit of risk. Simple Mart Retail is currently generating about -0.01 per unit of volatility. If you would invest  4,025  in Simple Mart Retail on December 23, 2024 and sell it today you would lose (30.00) from holding Simple Mart Retail or give up 0.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Newretail Co  vs.  Simple Mart Retail

Newretail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newretail Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Simple Mart Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simple Mart Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Simple Mart is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Newretail and Simple Mart

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

The idea behind Newretail Co and Simple Mart Retail 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.