Correlation Between RS GROUP and Supermarket Income

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

By analyzing existing cross correlation between RS GROUP PLC and Supermarket Income REIT, you can compare the effects of market volatilities on RS GROUP and Supermarket Income 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 RS GROUP with a short position of Supermarket Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of RS GROUP and Supermarket Income.

Diversification Opportunities for RS GROUP and Supermarket Income

0.69

Correlation Coefficient

RS GROUP  Supermarket Income

Poor diversification

The 3 months correlation between RS1 and Supermarket is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding RS GROUP PLC and Supermarket Income REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supermarket Income REIT and RS GROUP 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 RS GROUP PLC are associated (or correlated) with Supermarket Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supermarket Income REIT has no effect on the direction of RS GROUP i.e., RS GROUP and Supermarket Income go up and down completely randomly.

Pair Corralation between RS GROUP and Supermarket Income

Assuming the 90 days trading horizon RS GROUP PLC is expected to under-perform the Supermarket Income. In addition to that, RS GROUP is 1.08 times more volatile than Supermarket Income REIT. It trades about -0.26 of its total potential returns per unit of risk. Supermarket Income REIT is currently generating about -0.12 per unit of volatility. If you would invest  7,030  in Supermarket Income REIT on October 9, 2024 and sell it today you would lose (170.00) from holding Supermarket Income REIT or give up 2.42% of portfolio value over 90 days.

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

RS GROUP PLC  vs.  Supermarket Income REIT

RS GROUP PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RS GROUP PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supermarket Income REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Supermarket Income is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RS GROUP and Supermarket Income

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

The idea behind RS GROUP PLC and Supermarket Income REIT 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 Stocks Directory module to find actively traded stocks across global markets.