Correlation Between Shipping and Spencers Retail

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

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

Diversification Opportunities for Shipping and Spencers Retail

0.83

Correlation Coefficient

Shipping  Spencers Retail

Very poor diversification

The 3 months correlation between Shipping and Spencers is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shipping and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail and Shipping 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 Shipping are associated (or correlated) with Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of Shipping i.e., Shipping and Spencers Retail go up and down completely randomly.

Pair Corralation between Shipping and Spencers Retail

Assuming the 90 days trading horizon Shipping is expected to generate 1.0 times more return on investment than Spencers Retail. However, Shipping is 1.0 times more volatile than Spencers Retail Limited. It trades about -0.06 of its potential returns per unit of risk. Spencers Retail Limited is currently generating about -0.07 per unit of risk. If you would invest  26,824  in Shipping on September 4, 2024 and sell it today you would lose (3,396) from holding Shipping or give up 12.66% of portfolio value over 90 days.

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

Shipping  vs.  Spencers Retail Limited

Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Shipping and Spencers Retail

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

The idea behind Shipping and Spencers Retail 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.