Correlation Between Sierra E and Small Pany

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

By analyzing existing cross correlation between Sierra E Retirement and Small Pany Growth, you can compare the effects of market volatilities on Sierra E and Small Pany 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 Sierra E with a short position of Small Pany. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra E and Small Pany.

Diversification Opportunities for Sierra E and Small Pany

0.56

Correlation Coefficient

Sierra E  Small Pany

Very weak diversification

The 3 months correlation between Sierra and Small is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Sierra E 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 Sierra E Retirement are associated (or correlated) with Small Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Sierra E i.e., Sierra E and Small Pany go up and down completely randomly.

Pair Corralation between Sierra E and Small Pany

Assuming the 90 days horizon Sierra E Retirement is expected to generate 0.24 times more return on investment than Small Pany. However, Sierra E Retirement is 4.2 times less risky than Small Pany. It trades about 0.11 of its potential returns per unit of risk. Small Pany Growth is currently generating about -0.04 per unit of risk. If you would invest  2,308  in Sierra E Retirement on September 14, 2024 and sell it today you would earn a total of  13.00  from holding Sierra E Retirement or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Sierra E Retirement  vs.  Small Pany Growth

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra E Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sierra E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Pany Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Small Pany is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sierra E and Small Pany

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

The idea behind Sierra E Retirement and Small Pany Growth 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.