Correlation Between Deneb Investments and S A P

Can any of the company-specific risk be diversified away by investing in both Deneb Investments and S A P 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 Deneb Investments and S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deneb Investments and Sappi, you can compare the effects of market volatilities on Deneb Investments and S A P 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 Deneb Investments with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deneb Investments and S A P.

Diversification Opportunities for Deneb Investments and S A P

0.52

Correlation Coefficient

Deneb Investments  S A P

Very weak diversification

The 3 months correlation between Deneb and SAP is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Deneb Investments and Sappi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sappi and Deneb Investments 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 Deneb Investments are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sappi has no effect on the direction of Deneb Investments i.e., Deneb Investments and S A P go up and down completely randomly.

Pair Corralation between Deneb Investments and S A P

Assuming the 90 days trading horizon Deneb Investments is expected to generate 1.33 times more return on investment than S A P. However, Deneb Investments is 1.33 times more volatile than Sappi. It trades about 0.05 of its potential returns per unit of risk. Sappi is currently generating about -0.08 per unit of risk. If you would invest  21,600  in Deneb Investments on October 13, 2024 and sell it today you would earn a total of  400.00  from holding Deneb Investments or generate 1.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Deneb Investments  vs.  Sappi

Deneb Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deneb Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Deneb Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sappi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sappi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, S A P is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Deneb Investments and S A P

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

The idea behind Deneb Investments and Sappi 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.