Correlation Between Superior Plus and Source Markets

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

Diversification Opportunities for Superior Plus and Source Markets

0.49

Correlation Coefficient

Superior Plus  Source Markets

Very weak diversification

The 3 months correlation between Superior and Source is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Source Markets plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Markets plc 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 Source Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Markets plc has no effect on the direction of Superior Plus i.e., Superior Plus and Source Markets go up and down completely randomly.

Pair Corralation between Superior Plus and Source Markets

Assuming the 90 days horizon Superior Plus is expected to generate 3.68 times less return on investment than Source Markets. In addition to that, Superior Plus is 1.66 times more volatile than Source Markets plc. It trades about 0.06 of its total potential returns per unit of risk. Source Markets plc is currently generating about 0.37 per unit of volatility. If you would invest  51,830  in Source Markets plc on October 24, 2024 and sell it today you would earn a total of  4,020  from holding Source Markets plc or generate 7.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Superior Plus Corp  vs.  Source Markets plc

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.

Source Markets plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Source Markets plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Source Markets is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Superior Plus and Source Markets

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

The idea behind Superior Plus Corp and Source Markets plc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.