Correlation Between SPACE and Utilities Select

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

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

Diversification Opportunities for SPACE and Utilities Select

0.25

Correlation Coefficient

SPACE  Utilities Select

Modest diversification

The 3 months correlation between SPACE and Utilities is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Select Sector and SPACE 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 SPACE are associated (or correlated) with Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of SPACE i.e., SPACE and Utilities Select go up and down completely randomly.

Pair Corralation between SPACE and Utilities Select

Assuming the 90 days horizon SPACE is expected to generate 6.52 times more return on investment than Utilities Select. However, SPACE is 6.52 times more volatile than Utilities Select Sector. It trades about 0.08 of its potential returns per unit of risk. Utilities Select Sector is currently generating about 0.01 per unit of risk. If you would invest  41.00  in SPACE on October 7, 2024 and sell it today you would earn a total of  6.00  from holding SPACE or generate 14.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.35%
Values	Daily Returns

SPACE  vs.  Utilities Select Sector

SPACE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Utilities Select Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utilities Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Utilities Select is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPACE and Utilities Select

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

The idea behind SPACE and Utilities Select Sector 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.