Correlation Between Sailfish Royalty and Automotive Finco

Can any of the company-specific risk be diversified away by investing in both Sailfish Royalty and Automotive Finco 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 Sailfish Royalty and Automotive Finco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sailfish Royalty Corp and Automotive Finco Corp, you can compare the effects of market volatilities on Sailfish Royalty and Automotive Finco 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 Sailfish Royalty with a short position of Automotive Finco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sailfish Royalty and Automotive Finco.

Diversification Opportunities for Sailfish Royalty and Automotive Finco

0.61

Correlation Coefficient

Sailfish Royalty  Automotive Finco

Poor diversification

The 3 months correlation between Sailfish and Automotive is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sailfish Royalty Corp and Automotive Finco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Finco Corp and Sailfish Royalty 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 Sailfish Royalty Corp are associated (or correlated) with Automotive Finco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Finco Corp has no effect on the direction of Sailfish Royalty i.e., Sailfish Royalty and Automotive Finco go up and down completely randomly.

Pair Corralation between Sailfish Royalty and Automotive Finco

Assuming the 90 days trading horizon Sailfish Royalty is expected to generate 1.57 times less return on investment than Automotive Finco. But when comparing it to its historical volatility, Sailfish Royalty Corp is 1.3 times less risky than Automotive Finco. It trades about 0.1 of its potential returns per unit of risk. Automotive Finco Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Automotive Finco Corp on September 3, 2024 and sell it today you would earn a total of  19.00  from holding Automotive Finco Corp or generate 27.14% return on investment over 90 days.

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

Sailfish Royalty Corp  vs.  Automotive Finco Corp

Sailfish Royalty Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sailfish Royalty Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sailfish Royalty showed solid returns over the last few months and may actually be approaching a breakup point.

Automotive Finco Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Finco Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automotive Finco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sailfish Royalty and Automotive Finco

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

The idea behind Sailfish Royalty Corp and Automotive Finco Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.