Correlation Between Spencers Retail and Cartrade Tech

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

Diversification Opportunities for Spencers Retail and Cartrade Tech

-0.13

Correlation Coefficient

Spencers Retail  Cartrade Tech

Good diversification

The 3 months correlation between Spencers and Cartrade is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Cartrade Tech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cartrade Tech 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 Cartrade Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cartrade Tech Limited has no effect on the direction of Spencers Retail i.e., Spencers Retail and Cartrade Tech go up and down completely randomly.

Pair Corralation between Spencers Retail and Cartrade Tech

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the Cartrade Tech. But the stock apears to be less risky and, when comparing its historical volatility, Spencers Retail Limited is 1.15 times less risky than Cartrade Tech. The stock trades about -0.07 of its potential returns per unit of risk. The Cartrade Tech Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  135,560  in Cartrade Tech Limited on November 29, 2024 and sell it today you would earn a total of  14,310  from holding Cartrade Tech Limited or generate 10.56% return on investment over 90 days.

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

Spencers Retail Limited  vs.  Cartrade Tech Limited

Spencers Retail

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cartrade Tech Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cartrade Tech Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cartrade Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spencers Retail and Cartrade Tech

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

The idea behind Spencers Retail Limited and Cartrade Tech 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.