Correlation Between Coreshares Index and S A P

Can any of the company-specific risk be diversified away by investing in both Coreshares Index and S A P 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 Coreshares Index and S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coreshares Index Tracker and Sappi, you can compare the effects of market volatilities on Coreshares Index and S A P 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 Coreshares Index with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coreshares Index and S A P.

Diversification Opportunities for Coreshares Index and S A P

0.09

Correlation Coefficient

Coreshares Index  S A P

Significant diversification

The 3 months correlation between Coreshares and SAP is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Coreshares Index Tracker and Sappi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sappi and Coreshares Index 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 Coreshares Index Tracker are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sappi has no effect on the direction of Coreshares Index i.e., Coreshares Index and S A P go up and down completely randomly.

Pair Corralation between Coreshares Index and S A P

Assuming the 90 days trading horizon Coreshares Index Tracker is expected to generate 0.84 times more return on investment than S A P. However, Coreshares Index Tracker is 1.2 times less risky than S A P. It trades about -0.05 of its potential returns per unit of risk. Sappi is currently generating about -0.15 per unit of risk. If you would invest  110,000  in Coreshares Index Tracker on September 24, 2024 and sell it today you would lose (1,100) from holding Coreshares Index Tracker or give up 1.0% of portfolio value over 90 days.

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

Coreshares Index Tracker  vs.  Sappi

Coreshares Index Tracker

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coreshares Index Tracker are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Coreshares Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sappi

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Coreshares Index and S A P

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

The idea behind Coreshares Index Tracker and Sappi 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.