Correlation Between S A P and Empire Company

Can any of the company-specific risk be diversified away by investing in both S A P and Empire Company 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 S A P and Empire Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saputo Inc and Empire Company Limited, you can compare the effects of market volatilities on S A P and Empire Company 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 S A P with a short position of Empire Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Empire Company.

Diversification Opportunities for S A P and Empire Company

0.64

Correlation Coefficient

S A P  Empire Company

Poor diversification

The 3 months correlation between SAP and Empire is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Saputo Inc and Empire Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Limited and S A P 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 Saputo Inc are associated (or correlated) with Empire Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Limited has no effect on the direction of S A P i.e., S A P and Empire Company go up and down completely randomly.

Pair Corralation between S A P and Empire Company

Assuming the 90 days trading horizon Saputo Inc is expected to under-perform the Empire Company. In addition to that, S A P is 1.2 times more volatile than Empire Company Limited. It trades about 0.0 of its total potential returns per unit of risk. Empire Company Limited is currently generating about 0.1 per unit of volatility. If you would invest  4,349  in Empire Company Limited on December 30, 2024 and sell it today you would earn a total of  314.00  from holding Empire Company Limited or generate 7.22% return on investment over 90 days.

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

Saputo Inc  vs.  Empire Company Limited

Saputo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saputo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, S A P is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Empire Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Company Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Empire Company may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with S A P and Empire Company

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

The idea behind Saputo Inc and Empire Company Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.