Correlation Between SAI Old and Netcapital

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

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

Diversification Opportunities for SAI Old and Netcapital

0.07

Correlation Coefficient

SAI Old  Netcapital

Significant diversification

The 3 months correlation between SAI and Netcapital is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding SAI Old and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital and SAI Old 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 SAI Old are associated (or correlated) with Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of SAI Old i.e., SAI Old and Netcapital go up and down completely randomly.

Pair Corralation between SAI Old and Netcapital

Considering the 90-day investment horizon SAI Old is expected to generate 1.08 times more return on investment than Netcapital. However, SAI Old is 1.08 times more volatile than Netcapital. It trades about 0.04 of its potential returns per unit of risk. Netcapital is currently generating about -0.07 per unit of risk. If you would invest  105.00  in SAI Old on October 25, 2024 and sell it today you would earn a total of  12.00  from holding SAI Old or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.39%
Values	Daily Returns

SAI Old  vs.  Netcapital

SAI Old

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days SAI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, SAI Old demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Netcapital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Netcapital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAI Old and Netcapital

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

The idea behind SAI Old and Netcapital 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.