Correlation Between SK Growth and Sound Point

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

By analyzing existing cross correlation between SK Growth Opportunities and Sound Point Acquisition, you can compare the effects of market volatilities on SK Growth and Sound Point 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 SK Growth with a short position of Sound Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Growth and Sound Point.

Diversification Opportunities for SK Growth and Sound Point

-0.53

Correlation Coefficient

SK Growth  Sound Point

Excellent diversification

The 3 months correlation between SKGRU and Sound is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding SK Growth Opportunities and Sound Point Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Point Acquisition and SK Growth 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 SK Growth Opportunities are associated (or correlated) with Sound Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Point Acquisition has no effect on the direction of SK Growth i.e., SK Growth and Sound Point go up and down completely randomly.

Pair Corralation between SK Growth and Sound Point

Assuming the 90 days horizon SK Growth Opportunities is expected to generate 304.85 times more return on investment than Sound Point. However, SK Growth is 304.85 times more volatile than Sound Point Acquisition. It trades about 0.18 of its potential returns per unit of risk. Sound Point Acquisition is currently generating about 0.04 per unit of risk. If you would invest  1,034  in SK Growth Opportunities on October 23, 2024 and sell it today you would earn a total of  147.00  from holding SK Growth Opportunities or generate 14.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	74.59%
Values	Daily Returns

SK Growth Opportunities  vs.  Sound Point Acquisition

SK Growth Opportunities

Risk-Adjusted Performance

0 of 100

Market Crasher

Over the last 90 days SK Growth Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively abnormal basic indicators, SK Growth unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sound Point Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sound Point Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Sound Point is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SK Growth and Sound Point

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

The idea behind SK Growth Opportunities and Sound Point Acquisition 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.