Correlation Between Diamond Estates and Sparx Technology

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

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

Diversification Opportunities for Diamond Estates and Sparx Technology

-0.83

Correlation Coefficient

Diamond Estates  Sparx Technology

Pay attention - limited upside

The 3 months correlation between Diamond and Sparx is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and Sparx Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparx Technology and Diamond Estates 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 Diamond Estates Wines 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 Diamond Estates i.e., Diamond Estates and Sparx Technology go up and down completely randomly.

Pair Corralation between Diamond Estates and Sparx Technology

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the Sparx Technology. But the stock apears to be less risky and, when comparing its historical volatility, Diamond Estates Wines is 8.64 times less risky than Sparx Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Sparx Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Sparx Technology on September 23, 2024 and sell it today you would earn a total of  2,740  from holding Sparx Technology or generate 137000.0% return on investment over 90 days.

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

Diamond Estates Wines  vs.  Sparx Technology

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Sparx Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamond Estates and Sparx Technology

The main advantage of trading using opposite Diamond Estates and Sparx Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Estates 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 Diamond Estates Wines 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.