Correlation Between Retail Food and SPASX Dividend

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

By analyzing existing cross correlation between Retail Food Group and SPASX Dividend Opportunities, you can compare the effects of market volatilities on Retail Food and SPASX Dividend 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 Retail Food with a short position of SPASX Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Food and SPASX Dividend.

Diversification Opportunities for Retail Food and SPASX Dividend

0.24

Correlation Coefficient

Retail Food  SPASX Dividend

Modest diversification

The 3 months correlation between Retail and SPASX is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Retail Food Group and SPASX Dividend Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPASX Dividend Oppor and Retail Food 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 Retail Food Group are associated (or correlated) with SPASX Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPASX Dividend Oppor has no effect on the direction of Retail Food i.e., Retail Food and SPASX Dividend go up and down completely randomly.

Pair Corralation between Retail Food and SPASX Dividend

Assuming the 90 days trading horizon Retail Food Group is expected to under-perform the SPASX Dividend. In addition to that, Retail Food is 4.79 times more volatile than SPASX Dividend Opportunities. It trades about -0.21 of its total potential returns per unit of risk. SPASX Dividend Opportunities is currently generating about -0.11 per unit of volatility. If you would invest  169,570  in SPASX Dividend Opportunities on September 20, 2024 and sell it today you would lose (1,860) from holding SPASX Dividend Opportunities or give up 1.1% of portfolio value over 90 days.

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

Retail Food Group  vs.  SPASX Dividend Opportunities

Pair Trading with Retail Food and SPASX Dividend

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

The idea behind Retail Food Group and SPASX Dividend Opportunities 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.