Correlation Between Growthpoint Properties and SPAR

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

By analyzing existing cross correlation between Growthpoint Properties and SPAR Group, you can compare the effects of market volatilities on Growthpoint Properties and SPAR 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 Growthpoint Properties with a short position of SPAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growthpoint Properties and SPAR.

Diversification Opportunities for Growthpoint Properties and SPAR

-0.35

Correlation Coefficient

Growthpoint Properties  SPAR

Very good diversification

The 3 months correlation between Growthpoint and SPAR is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Growthpoint Properties and SPAR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPAR Group and Growthpoint Properties 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 Growthpoint Properties are associated (or correlated) with SPAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPAR Group has no effect on the direction of Growthpoint Properties i.e., Growthpoint Properties and SPAR go up and down completely randomly.

Pair Corralation between Growthpoint Properties and SPAR

Assuming the 90 days trading horizon Growthpoint Properties is expected to under-perform the SPAR. But the stock apears to be less risky and, when comparing its historical volatility, Growthpoint Properties is 1.2 times less risky than SPAR. The stock trades about -0.03 of its potential returns per unit of risk. The SPAR Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,306,000  in SPAR Group on October 9, 2024 and sell it today you would earn a total of  165,500  from holding SPAR Group or generate 12.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Growthpoint Properties  vs.  SPAR Group

Growthpoint Properties

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPAR Group

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Growthpoint Properties and SPAR

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

The idea behind Growthpoint Properties and SPAR Group 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.