Correlation Between Bassac and Sword Group

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

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

Diversification Opportunities for Bassac and Sword Group

-0.13

Correlation Coefficient

Bassac  Sword Group

Good diversification

The 3 months correlation between Bassac and Sword is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bassac and Sword Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sword Group SE and Bassac 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 Bassac are associated (or correlated) with Sword Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sword Group SE has no effect on the direction of Bassac i.e., Bassac and Sword Group go up and down completely randomly.

Pair Corralation between Bassac and Sword Group

Assuming the 90 days trading horizon Bassac is expected to under-perform the Sword Group. In addition to that, Bassac is 2.25 times more volatile than Sword Group SE. It trades about -0.09 of its total potential returns per unit of risk. Sword Group SE is currently generating about -0.07 per unit of volatility. If you would invest  3,670  in Sword Group SE on September 17, 2024 and sell it today you would lose (80.00) from holding Sword Group SE or give up 2.18% of portfolio value over 90 days.

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

Bassac  vs.  Sword Group SE

Bassac

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bassac are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bassac is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Sword Group SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sword Group SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bassac and Sword Group

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

The idea behind Bassac and Sword Group SE 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.