Correlation Between Retailors and Sarine Technologies

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

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

Diversification Opportunities for Retailors and Sarine Technologies

0.31

Correlation Coefficient

Retailors  Sarine Technologies

Weak diversification

The 3 months correlation between Retailors and Sarine is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Retailors and Sarine Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarine Technologies and Retailors 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 Retailors are associated (or correlated) with Sarine Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarine Technologies has no effect on the direction of Retailors i.e., Retailors and Sarine Technologies go up and down completely randomly.

Pair Corralation between Retailors and Sarine Technologies

Assuming the 90 days trading horizon Retailors is expected to generate 1.6 times more return on investment than Sarine Technologies. However, Retailors is 1.6 times more volatile than Sarine Technologies. It trades about 0.12 of its potential returns per unit of risk. Sarine Technologies is currently generating about -0.04 per unit of risk. If you would invest  638,568  in Retailors on September 1, 2024 and sell it today you would earn a total of  93,032  from holding Retailors or generate 14.57% return on investment over 90 days.

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

Retailors  vs.  Sarine Technologies

Retailors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Retailors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Retailors sustained solid returns over the last few months and may actually be approaching a breakup point.

Sarine Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarine Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sarine Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Retailors and Sarine Technologies

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

The idea behind Retailors and Sarine Technologies 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.