Correlation Between Spencers Retail and Aban Offshore

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

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

Diversification Opportunities for Spencers Retail and Aban Offshore

0.84

Correlation Coefficient

Spencers Retail  Aban Offshore

Very poor diversification

The 3 months correlation between Spencers and Aban is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited and Spencers Retail 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 Spencers Retail Limited are associated (or correlated) with Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of Spencers Retail i.e., Spencers Retail and Aban Offshore go up and down completely randomly.

Pair Corralation between Spencers Retail and Aban Offshore

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the Aban Offshore. In addition to that, Spencers Retail is 1.05 times more volatile than Aban Offshore Limited. It trades about -0.03 of its total potential returns per unit of risk. Aban Offshore Limited is currently generating about 0.0 per unit of volatility. If you would invest  6,486  in Aban Offshore Limited on October 7, 2024 and sell it today you would lose (87.00) from holding Aban Offshore Limited or give up 1.34% of portfolio value over 90 days.

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

Spencers Retail Limited  vs.  Aban Offshore Limited

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Spencers Retail is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Aban Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aban Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Spencers Retail and Aban Offshore

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

The idea behind Spencers Retail Limited and Aban Offshore 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.