Correlation Between Sanwire and Hanover House

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

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

Diversification Opportunities for Sanwire and Hanover House

0.32

Correlation Coefficient

Sanwire  Hanover House

Weak diversification

The 3 months correlation between Sanwire and Hanover is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sanwire and Hanover House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover House and Sanwire 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 Sanwire are associated (or correlated) with Hanover House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover House has no effect on the direction of Sanwire i.e., Sanwire and Hanover House go up and down completely randomly.

Pair Corralation between Sanwire and Hanover House

Given the investment horizon of 90 days Sanwire is expected to generate 1.3 times more return on investment than Hanover House. However, Sanwire is 1.3 times more volatile than Hanover House. It trades about 0.06 of its potential returns per unit of risk. Hanover House is currently generating about -0.01 per unit of risk. If you would invest  0.03  in Sanwire on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Sanwire or generate 0.0% return on investment over 90 days.

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

Sanwire  vs.  Hanover House

Sanwire

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sanwire are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Sanwire reported solid returns over the last few months and may actually be approaching a breakup point.

Hanover House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanover House has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Hanover House is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sanwire and Hanover House

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

The idea behind Sanwire and Hanover House 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.