Correlation Between Loads and Synthetic Products

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

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

Diversification Opportunities for Loads and Synthetic Products

0.52

Correlation Coefficient

Loads  Synthetic Products

Very weak diversification

The 3 months correlation between Loads and Synthetic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Loads and Synthetic Products Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synthetic Products and Loads 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 Loads are associated (or correlated) with Synthetic Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synthetic Products has no effect on the direction of Loads i.e., Loads and Synthetic Products go up and down completely randomly.

Pair Corralation between Loads and Synthetic Products

Assuming the 90 days trading horizon Loads is expected to generate 0.89 times more return on investment than Synthetic Products. However, Loads is 1.12 times less risky than Synthetic Products. It trades about 0.24 of its potential returns per unit of risk. Synthetic Products Enterprises is currently generating about 0.06 per unit of risk. If you would invest  1,034  in Loads on October 24, 2024 and sell it today you would earn a total of  702.00  from holding Loads or generate 67.89% return on investment over 90 days.

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

Loads  vs.  Synthetic Products Enterprises

Loads

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loads are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Loads disclosed solid returns over the last few months and may actually be approaching a breakup point.

Synthetic Products

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Synthetic Products Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Synthetic Products sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loads and Synthetic Products

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

The idea behind Loads and Synthetic Products Enterprises 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.