Correlation Between Pacific Basin and SPARTAN STORES
Can any of the company-specific risk be diversified away by investing in both Pacific Basin and SPARTAN STORES 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 Pacific Basin and SPARTAN STORES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Basin Shipping and SPARTAN STORES, you can compare the effects of market volatilities on Pacific Basin and SPARTAN STORES 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 Pacific Basin with a short position of SPARTAN STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Basin and SPARTAN STORES.
Diversification Opportunities for Pacific Basin and SPARTAN STORES
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pacific and SPARTAN is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES and Pacific Basin 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 Pacific Basin Shipping are associated (or correlated) with SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of Pacific Basin i.e., Pacific Basin and SPARTAN STORES go up and down completely randomly.
Pair Corralation between Pacific Basin and SPARTAN STORES
Assuming the 90 days horizon Pacific Basin Shipping is expected to generate 2.4 times more return on investment than SPARTAN STORES. However, Pacific Basin is 2.4 times more volatile than SPARTAN STORES. It trades about 0.05 of its potential returns per unit of risk. SPARTAN STORES is currently generating about -0.03 per unit of risk. If you would invest 9.87 in Pacific Basin Shipping on October 23, 2024 and sell it today you would earn a total of 10.13 from holding Pacific Basin Shipping or generate 102.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Pacific Basin Shipping vs. SPARTAN STORES
Performance |
Timeline |
Pacific Basin Shipping |
SPARTAN STORES |
Pacific Basin and SPARTAN STORES Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pacific Basin and SPARTAN STORES
The main advantage of trading using opposite Pacific Basin and SPARTAN STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Basin position performs unexpectedly, SPARTAN STORES 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 SPARTAN STORES will offset losses from the drop in SPARTAN STORES's long position.Pacific Basin vs. Inspire Medical Systems | Pacific Basin vs. Diamyd Medical AB | Pacific Basin vs. Iridium Communications | Pacific Basin vs. CENTURIA OFFICE REIT |
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Check out your portfolio center.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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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