Correlation Between Spartan Delta and Topaz Energy

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

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

Diversification Opportunities for Spartan Delta and Topaz Energy

0.75

Correlation Coefficient

Spartan Delta  Topaz Energy

Poor diversification

The 3 months correlation between Spartan and Topaz is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Spartan Delta Corp and Topaz Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Energy Corp and Spartan Delta 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 Spartan Delta Corp are associated (or correlated) with Topaz Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Energy Corp has no effect on the direction of Spartan Delta i.e., Spartan Delta and Topaz Energy go up and down completely randomly.

Pair Corralation between Spartan Delta and Topaz Energy

Assuming the 90 days trading horizon Spartan Delta Corp is expected to generate 2.15 times more return on investment than Topaz Energy. However, Spartan Delta is 2.15 times more volatile than Topaz Energy Corp. It trades about -0.01 of its potential returns per unit of risk. Topaz Energy Corp is currently generating about -0.16 per unit of risk. If you would invest  333.00  in Spartan Delta Corp on December 30, 2024 and sell it today you would lose (10.00) from holding Spartan Delta Corp or give up 3.0% of portfolio value over 90 days.

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

Spartan Delta Corp  vs.  Topaz Energy Corp

Spartan Delta Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spartan Delta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Spartan Delta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Topaz Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Topaz Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Spartan Delta and Topaz Energy

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

The idea behind Spartan Delta Corp and Topaz Energy Corp 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.