Correlation Between Sports Gear and WINSON Machinery

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

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

Diversification Opportunities for Sports Gear and WINSON Machinery

-0.51

Correlation Coefficient

Sports Gear  WINSON Machinery

Excellent diversification

The 3 months correlation between Sports and WINSON is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and WINSON Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WINSON Machinery and Sports Gear 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 Sports Gear Co are associated (or correlated) with WINSON Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WINSON Machinery has no effect on the direction of Sports Gear i.e., Sports Gear and WINSON Machinery go up and down completely randomly.

Pair Corralation between Sports Gear and WINSON Machinery

Assuming the 90 days trading horizon Sports Gear Co is expected to generate 1.22 times more return on investment than WINSON Machinery. However, Sports Gear is 1.22 times more volatile than WINSON Machinery Co. It trades about 0.12 of its potential returns per unit of risk. WINSON Machinery Co is currently generating about 0.02 per unit of risk. If you would invest  6,390  in Sports Gear Co on October 2, 2024 and sell it today you would earn a total of  5,610  from holding Sports Gear Co or generate 87.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sports Gear Co  vs.  WINSON Machinery Co

Sports Gear

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sports Gear Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sports Gear showed solid returns over the last few months and may actually be approaching a breakup point.

WINSON Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WINSON Machinery 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.

Pair Trading with Sports Gear and WINSON Machinery

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

The idea behind Sports Gear Co and WINSON Machinery Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.