Correlation Between Queens Road and Sprucegrove International

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

By analyzing existing cross correlation between Queens Road Small and Sprucegrove International Equity, you can compare the effects of market volatilities on Queens Road and Sprucegrove International 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 Queens Road with a short position of Sprucegrove International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Queens Road and Sprucegrove International.

Diversification Opportunities for Queens Road and Sprucegrove International

0.74

Correlation Coefficient

Queens Road  Sprucegrove International

Poor diversification

The 3 months correlation between Queens and Sprucegrove is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Queens Road Small and Sprucegrove International Equi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprucegrove International and Queens Road 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 Queens Road Small are associated (or correlated) with Sprucegrove International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprucegrove International has no effect on the direction of Queens Road i.e., Queens Road and Sprucegrove International go up and down completely randomly.

Pair Corralation between Queens Road and Sprucegrove International

Assuming the 90 days horizon Queens Road Small is expected to under-perform the Sprucegrove International. In addition to that, Queens Road is 1.51 times more volatile than Sprucegrove International Equity. It trades about -0.18 of its total potential returns per unit of risk. Sprucegrove International Equity is currently generating about 0.3 per unit of volatility. If you would invest  6,683  in Sprucegrove International Equity on December 5, 2024 and sell it today you would earn a total of  246.00  from holding Sprucegrove International Equity or generate 3.68% return on investment over 90 days.

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

Queens Road Small  vs.  Sprucegrove International Equi

Queens Road Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Queens Road Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sprucegrove International

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Queens Road and Sprucegrove International

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

The idea behind Queens Road Small and Sprucegrove International Equity 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.