Correlation Between Spencers Retail and City Union

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

Diversification Opportunities for Spencers Retail and City Union

0.19

Correlation Coefficient

Spencers Retail  City Union

Average diversification

The 3 months correlation between Spencers and City is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and City Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Union Bank 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 City Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Union Bank has no effect on the direction of Spencers Retail i.e., Spencers Retail and City Union go up and down completely randomly.

Pair Corralation between Spencers Retail and City Union

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the City Union. In addition to that, Spencers Retail is 2.2 times more volatile than City Union Bank. It trades about -0.03 of its total potential returns per unit of risk. City Union Bank is currently generating about 0.0 per unit of volatility. If you would invest  17,186  in City Union Bank on October 26, 2024 and sell it today you would lose (166.00) from holding City Union Bank or give up 0.97% of portfolio value over 90 days.

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

Spencers Retail Limited  vs.  City Union Bank

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

City Union Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Spencers Retail and City Union

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

The idea behind Spencers Retail Limited and City Union Bank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.