Correlation Between SBF 120 and Sergeferrari

Can any of the company-specific risk be diversified away by investing in both SBF 120 and Sergeferrari 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 SBF 120 and Sergeferrari into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SBF 120 and Sergeferrari G, you can compare the effects of market volatilities on SBF 120 and Sergeferrari 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 SBF 120 with a short position of Sergeferrari. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBF 120 and Sergeferrari.

Diversification Opportunities for SBF 120 and Sergeferrari

-0.26

Correlation Coefficient

SBF 120  Sergeferrari

Very good diversification

The 3 months correlation between SBF and Sergeferrari is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding SBF 120 and Sergeferrari G in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sergeferrari G and SBF 120 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 SBF 120 are associated (or correlated) with Sergeferrari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sergeferrari G has no effect on the direction of SBF 120 i.e., SBF 120 and Sergeferrari go up and down completely randomly.

Pair Corralation between SBF 120 and Sergeferrari

Assuming the 90 days trading horizon SBF 120 is expected to generate 0.55 times more return on investment than Sergeferrari. However, SBF 120 is 1.8 times less risky than Sergeferrari. It trades about -0.15 of its potential returns per unit of risk. Sergeferrari G is currently generating about -0.49 per unit of risk. If you would invest  562,610  in SBF 120 on October 7, 2024 and sell it today you would lose (10,575) from holding SBF 120 or give up 1.88% of portfolio value over 90 days.

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

SBF 120  vs.  Sergeferrari G

Pair Trading with SBF 120 and Sergeferrari

The main advantage of trading using opposite SBF 120 and Sergeferrari positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBF 120 position performs unexpectedly, Sergeferrari 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 Sergeferrari will offset losses from the drop in Sergeferrari's long position.

The idea behind SBF 120 and Sergeferrari G 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .