Correlation Between SPASX Dividend and BSA

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

By analyzing existing cross correlation between SPASX Dividend Opportunities and BSA, you can compare the effects of market volatilities on SPASX Dividend and BSA 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 SPASX Dividend with a short position of BSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPASX Dividend and BSA.

Diversification Opportunities for SPASX Dividend and BSA

0.65

Correlation Coefficient

SPASX Dividend  BSA

Poor diversification

The 3 months correlation between SPASX and BSA is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SPASX Dividend Opportunities and BSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSA and SPASX Dividend 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 SPASX Dividend Opportunities are associated (or correlated) with BSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSA has no effect on the direction of SPASX Dividend i.e., SPASX Dividend and BSA go up and down completely randomly.

Pair Corralation between SPASX Dividend and BSA

Assuming the 90 days trading horizon SPASX Dividend Opportunities is expected to generate 0.06 times more return on investment than BSA. However, SPASX Dividend Opportunities is 17.82 times less risky than BSA. It trades about -0.03 of its potential returns per unit of risk. BSA is currently generating about -0.23 per unit of risk. If you would invest  166,880  in SPASX Dividend Opportunities on December 27, 2024 and sell it today you would lose (2,230) from holding SPASX Dividend Opportunities or give up 1.34% of portfolio value over 90 days.

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

SPASX Dividend Opportunities  vs.  BSA

Pair Trading with SPASX Dividend and BSA

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

The idea behind SPASX Dividend Opportunities and BSA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.