Correlation Between Mairs Power and Sound Shore

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

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

Diversification Opportunities for Mairs Power and Sound Shore

0.37

Correlation Coefficient

Mairs Power  Sound Shore

Weak diversification

The 3 months correlation between Mairs and Sound is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Mairs Power Growth and Sound Shore Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Shore Fund and Mairs Power 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 Mairs Power Growth are associated (or correlated) with Sound Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Shore Fund has no effect on the direction of Mairs Power i.e., Mairs Power and Sound Shore go up and down completely randomly.

Pair Corralation between Mairs Power and Sound Shore

Assuming the 90 days horizon Mairs Power Growth is expected to under-perform the Sound Shore. In addition to that, Mairs Power is 1.18 times more volatile than Sound Shore Fund. It trades about -0.06 of its total potential returns per unit of risk. Sound Shore Fund is currently generating about -0.02 per unit of volatility. If you would invest  3,835  in Sound Shore Fund on December 28, 2024 and sell it today you would lose (52.00) from holding Sound Shore Fund or give up 1.36% of portfolio value over 90 days.

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

Mairs Power Growth  vs.  Sound Shore Fund

Mairs Power Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mairs Power Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Mairs Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sound Shore Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sound Shore Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sound Shore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mairs Power and Sound Shore

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

The idea behind Mairs Power Growth and Sound Shore Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.