Correlation Between MULTI CHEM and SPORTING

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

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

Diversification Opportunities for MULTI CHEM and SPORTING

0.2

Correlation Coefficient

MULTI CHEM  SPORTING

Modest diversification

The 3 months correlation between MULTI and SPORTING is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding MULTI CHEM LTD and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING and MULTI CHEM 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 MULTI CHEM LTD are associated (or correlated) with SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of MULTI CHEM i.e., MULTI CHEM and SPORTING go up and down completely randomly.

Pair Corralation between MULTI CHEM and SPORTING

Assuming the 90 days trading horizon MULTI CHEM LTD is expected to under-perform the SPORTING. In addition to that, MULTI CHEM is 2.81 times more volatile than SPORTING. It trades about -0.08 of its total potential returns per unit of risk. SPORTING is currently generating about -0.18 per unit of volatility. If you would invest  106.00  in SPORTING on September 23, 2024 and sell it today you would lose (4.00) from holding SPORTING or give up 3.77% of portfolio value over 90 days.

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

MULTI CHEM LTD  vs.  SPORTING

MULTI CHEM LTD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MULTI CHEM LTD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MULTI CHEM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SPORTING

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPORTING are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, SPORTING is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MULTI CHEM and SPORTING

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

The idea behind MULTI CHEM LTD and SPORTING 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.