Correlation Between North American and Sparx Technology

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

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

Diversification Opportunities for North American and Sparx Technology

0.89

Correlation Coefficient

North American  Sparx Technology

Very poor diversification

The 3 months correlation between North and Sparx is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Sparx Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparx Technology and North American 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 North American Financial 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 North American i.e., North American and Sparx Technology go up and down completely randomly.

Pair Corralation between North American and Sparx Technology

Assuming the 90 days trading horizon North American Financial is expected to generate 0.58 times more return on investment than Sparx Technology. However, North American Financial is 1.74 times less risky than Sparx Technology. It trades about -0.07 of its potential returns per unit of risk. Sparx Technology is currently generating about -0.11 per unit of risk. If you would invest  677.00  in North American Financial on December 29, 2024 and sell it today you would lose (65.00) from holding North American Financial or give up 9.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

North American Financial  vs.  Sparx Technology

North American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sparx Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with North American and Sparx Technology

The main advantage of trading using opposite North American and Sparx Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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 North American Financial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.