Correlation Between MicroStrategy Incorporated and Sparta Commercial

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

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

Diversification Opportunities for MicroStrategy Incorporated and Sparta Commercial

-0.16

Correlation Coefficient

MicroStrategy Incorporated  Sparta Commercial

Good diversification

The 3 months correlation between MicroStrategy and Sparta is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and Sparta Commercial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Commercial and MicroStrategy Incorporated 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 MicroStrategy Incorporated are associated (or correlated) with Sparta Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Commercial has no effect on the direction of MicroStrategy Incorporated i.e., MicroStrategy Incorporated and Sparta Commercial go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and Sparta Commercial

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to under-perform the Sparta Commercial. But the stock apears to be less risky and, when comparing its historical volatility, MicroStrategy Incorporated is 1.82 times less risky than Sparta Commercial. The stock trades about -0.1 of its potential returns per unit of risk. The Sparta Commercial Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Sparta Commercial Services on November 29, 2024 and sell it today you would earn a total of  1.00  from holding Sparta Commercial Services or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

MicroStrategy Incorporated  vs.  Sparta Commercial Services

MicroStrategy Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroStrategy Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Sparta Commercial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Commercial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Sparta Commercial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroStrategy Incorporated and Sparta Commercial

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

The idea behind MicroStrategy Incorporated and Sparta Commercial Services 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.