Correlation Between Superior Plus and Vicinity Centres

Can any of the company-specific risk be diversified away by investing in both Superior Plus and Vicinity Centres 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 Vicinity Centres 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 Vicinity Centres, you can compare the effects of market volatilities on Superior Plus and Vicinity Centres 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 Vicinity Centres. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Vicinity Centres.

Diversification Opportunities for Superior Plus and Vicinity Centres

0.82

Correlation Coefficient

Superior Plus  Vicinity Centres

Very poor diversification

The 3 months correlation between Superior and Vicinity is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Vicinity Centres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Centres 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 Vicinity Centres. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Centres has no effect on the direction of Superior Plus i.e., Superior Plus and Vicinity Centres go up and down completely randomly.

Pair Corralation between Superior Plus and Vicinity Centres

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Vicinity Centres. In addition to that, Superior Plus is 2.56 times more volatile than Vicinity Centres. It trades about -0.04 of its total potential returns per unit of risk. Vicinity Centres is currently generating about -0.03 per unit of volatility. If you would invest  131.00  in Vicinity Centres on September 2, 2024 and sell it today you would lose (4.00) from holding Vicinity Centres or give up 3.05% of portfolio value over 90 days.

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

Superior Plus Corp  vs.  Vicinity Centres

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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Vicinity Centres

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Superior Plus and Vicinity Centres

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

The idea behind Superior Plus Corp and Vicinity Centres 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.