Correlation Between South Basic and SSIAM VNFIN

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

By analyzing existing cross correlation between South Basic Chemicals and SSIAM VNFIN LEAD, you can compare the effects of market volatilities on South Basic and SSIAM VNFIN 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 South Basic with a short position of SSIAM VNFIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Basic and SSIAM VNFIN.

Diversification Opportunities for South Basic and SSIAM VNFIN

0.55

Correlation Coefficient

South Basic  SSIAM VNFIN

Very weak diversification

The 3 months correlation between South and SSIAM is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals and SSIAM VNFIN LEAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSIAM VNFIN LEAD and South Basic 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 South Basic Chemicals are associated (or correlated) with SSIAM VNFIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSIAM VNFIN LEAD has no effect on the direction of South Basic i.e., South Basic and SSIAM VNFIN go up and down completely randomly.

Pair Corralation between South Basic and SSIAM VNFIN

Assuming the 90 days trading horizon South Basic Chemicals is expected to under-perform the SSIAM VNFIN. In addition to that, South Basic is 2.44 times more volatile than SSIAM VNFIN LEAD. It trades about -0.08 of its total potential returns per unit of risk. SSIAM VNFIN LEAD is currently generating about 0.14 per unit of volatility. If you would invest  2,195,000  in SSIAM VNFIN LEAD on December 2, 2024 and sell it today you would earn a total of  95,000  from holding SSIAM VNFIN LEAD or generate 4.33% return on investment over 90 days.

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

South Basic Chemicals  vs.  SSIAM VNFIN LEAD

South Basic Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South Basic Chemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, South Basic displayed solid returns over the last few months and may actually be approaching a breakup point.

SSIAM VNFIN LEAD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SSIAM VNFIN LEAD are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, SSIAM VNFIN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with South Basic and SSIAM VNFIN

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

The idea behind South Basic Chemicals and SSIAM VNFIN LEAD 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.