Correlation Between Sparta Capital and Dillards

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

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

Diversification Opportunities for Sparta Capital and Dillards

-0.59

Correlation Coefficient

Sparta Capital  Dillards

Excellent diversification

The 3 months correlation between Sparta and Dillards is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards and Sparta Capital 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 Sparta Capital are associated (or correlated) with Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of Sparta Capital i.e., Sparta Capital and Dillards go up and down completely randomly.

Pair Corralation between Sparta Capital and Dillards

Assuming the 90 days horizon Sparta Capital is expected to generate 1.49 times less return on investment than Dillards. In addition to that, Sparta Capital is 3.61 times more volatile than Dillards. It trades about 0.02 of its total potential returns per unit of risk. Dillards is currently generating about 0.09 per unit of volatility. If you would invest  26,676  in Dillards on October 8, 2024 and sell it today you would earn a total of  19,043  from holding Dillards or generate 71.39% return on investment over 90 days.

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

Sparta Capital  vs.  Dillards

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dillards

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Dillards unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparta Capital and Dillards

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

The idea behind Sparta Capital and Dillards 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.