Correlation Between Target and Sky Century

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

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

Diversification Opportunities for Target and Sky Century

-0.23

Correlation Coefficient

Target  Sky Century

Very good diversification

The 3 months correlation between Target and Sky is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Target Group and Sky Century Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Century Investment and Target 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 Target Group are associated (or correlated) with Sky Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Century Investment has no effect on the direction of Target i.e., Target and Sky Century go up and down completely randomly.

Pair Corralation between Target and Sky Century

Given the investment horizon of 90 days Target is expected to generate 3.49 times less return on investment than Sky Century. But when comparing it to its historical volatility, Target Group is 1.78 times less risky than Sky Century. It trades about 0.14 of its potential returns per unit of risk. Sky Century Investment is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  0.09  in Sky Century Investment on December 5, 2024 and sell it today you would earn a total of  0.11  from holding Sky Century Investment or generate 122.22% return on investment over 90 days.

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

Target Group  vs.  Sky Century Investment

Target Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Target Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Target showed solid returns over the last few months and may actually be approaching a breakup point.

Sky Century Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Century Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Sky Century demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target and Sky Century

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

The idea behind Target Group and Sky Century Investment 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.