Correlation Between Inventronics and Supremex

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

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

Diversification Opportunities for Inventronics and Supremex

-0.4

Correlation Coefficient

Inventronics  Supremex

Very good diversification

The 3 months correlation between Inventronics and Supremex is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Inventronics and Supremex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supremex and Inventronics 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 Inventronics are associated (or correlated) with Supremex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supremex has no effect on the direction of Inventronics i.e., Inventronics and Supremex go up and down completely randomly.

Pair Corralation between Inventronics and Supremex

Assuming the 90 days horizon Inventronics is expected to under-perform the Supremex. In addition to that, Inventronics is 1.51 times more volatile than Supremex. It trades about -0.02 of its total potential returns per unit of risk. Supremex is currently generating about 0.03 per unit of volatility. If you would invest  379.00  in Supremex on December 24, 2024 and sell it today you would earn a total of  13.00  from holding Supremex or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Inventronics  vs.  Supremex

Inventronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inventronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Inventronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Supremex

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Supremex are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Supremex is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Inventronics and Supremex

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

The idea behind Inventronics and Supremex 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.