Correlation Between SGS SA and World Houseware

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

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

Diversification Opportunities for SGS SA and World Houseware

0.0

Correlation Coefficient

SGS SA  World Houseware

Pay attention - limited upside

The 3 months correlation between SGS and World is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and World Houseware Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Houseware and SGS SA 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 SGS SA are associated (or correlated) with World Houseware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Houseware has no effect on the direction of SGS SA i.e., SGS SA and World Houseware go up and down completely randomly.

Pair Corralation between SGS SA and World Houseware

Assuming the 90 days horizon SGS SA is expected to generate 33.08 times more return on investment than World Houseware. However, SGS SA is 33.08 times more volatile than World Houseware Limited. It trades about 0.12 of its potential returns per unit of risk. World Houseware Limited is currently generating about -0.01 per unit of risk. If you would invest  229,975  in SGS SA on September 14, 2024 and sell it today you would lose (220,235) from holding SGS SA or give up 95.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	73.33%
Values	Daily Returns

SGS SA  vs.  World Houseware Limited

SGS SA

Risk-Adjusted Performance

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Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

World Houseware

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Houseware Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, World Houseware is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SGS SA and World Houseware

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

The idea behind SGS SA and World Houseware 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.