Correlation Between Netcapital and SAI Old

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

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

Diversification Opportunities for Netcapital and SAI Old

0.07

Correlation Coefficient

Netcapital  SAI Old

Significant diversification

The 3 months correlation between Netcapital and SAI is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital and SAI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAI Old and Netcapital 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 Netcapital are associated (or correlated) with SAI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAI Old has no effect on the direction of Netcapital i.e., Netcapital and SAI Old go up and down completely randomly.

Pair Corralation between Netcapital and SAI Old

Given the investment horizon of 90 days Netcapital is expected to under-perform the SAI Old. But the stock apears to be less risky and, when comparing its historical volatility, Netcapital is 1.47 times less risky than SAI Old. The stock trades about -0.1 of its potential returns per unit of risk. The SAI Old is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  88.00  in SAI Old on October 25, 2024 and sell it today you would earn a total of  29.00  from holding SAI Old or generate 32.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.41%
Values	Daily Returns

Netcapital  vs.  SAI Old

Netcapital

Risk-Adjusted Performance

4 of 100

Insignificant

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

SAI Old

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days SAI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, SAI Old demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netcapital and SAI Old

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

The idea behind Netcapital and SAI Old 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.