Correlation Between Superior Plus and DevEx Resources

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

By analyzing existing cross correlation between Superior Plus Corp and DevEx Resources Limited, you can compare the effects of market volatilities on Superior Plus and DevEx Resources 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 Superior Plus with a short position of DevEx Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and DevEx Resources.

Diversification Opportunities for Superior Plus and DevEx Resources

0.51

Correlation Coefficient

Superior Plus  DevEx Resources

Very weak diversification

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

Pair Corralation between Superior Plus and DevEx Resources

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the DevEx Resources. But the stock apears to be less risky and, when comparing its historical volatility, Superior Plus Corp is 3.81 times less risky than DevEx Resources. The stock trades about -0.03 of its potential returns per unit of risk. The DevEx Resources Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7.40  in DevEx Resources Limited on September 14, 2024 and sell it today you would lose (1.90) from holding DevEx Resources Limited or give up 25.68% of portfolio value over 90 days.

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

Superior Plus Corp  vs.  DevEx Resources Limited

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Superior Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

DevEx Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DevEx Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DevEx Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Plus and DevEx Resources

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

The idea behind Superior Plus Corp and DevEx Resources Limited 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.