Correlation Between Dream Office and Sparx Technology

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

By analyzing existing cross correlation between Dream Office Real and Sparx Technology, you can compare the effects of market volatilities on Dream Office and Sparx Technology 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 Dream Office with a short position of Sparx Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Office and Sparx Technology.

Diversification Opportunities for Dream Office and Sparx Technology

-0.86

Correlation Coefficient

Dream Office  Sparx Technology

Pay attention - limited upside

The 3 months correlation between Dream and Sparx is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dream Office Real and Sparx Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparx Technology and Dream Office 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 Dream Office Real are associated (or correlated) with Sparx Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparx Technology has no effect on the direction of Dream Office i.e., Dream Office and Sparx Technology go up and down completely randomly.

Pair Corralation between Dream Office and Sparx Technology

Assuming the 90 days trading horizon Dream Office is expected to generate 2.31 times less return on investment than Sparx Technology. But when comparing it to its historical volatility, Dream Office Real is 1.08 times less risky than Sparx Technology. It trades about 0.02 of its potential returns per unit of risk. Sparx Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,430  in Sparx Technology on October 4, 2024 and sell it today you would earn a total of  283.00  from holding Sparx Technology or generate 11.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.4%
Values	Daily Returns

Dream Office Real  vs.  Sparx Technology

Dream Office Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Office Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sparx Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dream Office and Sparx Technology

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

The idea behind Dream Office Real and Sparx Technology 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.