Correlation Between Spencers Retail and BAG Films

Can any of the company-specific risk be diversified away by investing in both Spencers Retail and BAG Films 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 BAG Films 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 BAG Films and, you can compare the effects of market volatilities on Spencers Retail and BAG Films 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 BAG Films. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spencers Retail and BAG Films.

Diversification Opportunities for Spencers Retail and BAG Films

0.54

Correlation Coefficient

Spencers Retail  BAG Films

Very weak diversification

The 3 months correlation between Spencers and BAG is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and BAG Films and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAG Films 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 BAG Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAG Films has no effect on the direction of Spencers Retail i.e., Spencers Retail and BAG Films go up and down completely randomly.

Pair Corralation between Spencers Retail and BAG Films

Assuming the 90 days trading horizon Spencers Retail Limited is expected to generate 0.79 times more return on investment than BAG Films. However, Spencers Retail Limited is 1.27 times less risky than BAG Films. It trades about -0.02 of its potential returns per unit of risk. BAG Films and is currently generating about -0.06 per unit of risk. If you would invest  9,422  in Spencers Retail Limited on October 7, 2024 and sell it today you would lose (435.00) from holding Spencers Retail Limited or give up 4.62% of portfolio value over 90 days.

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

Spencers Retail Limited  vs.  BAG Films and

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.

BAG Films

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAG Films and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Spencers Retail and BAG Films

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

The idea behind Spencers Retail Limited and BAG Films and 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.