Correlation Between Spencers Retail and Fertilizers

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

Diversification Opportunities for Spencers Retail and Fertilizers

0.26

Correlation Coefficient

Spencers Retail  Fertilizers

Modest diversification

The 3 months correlation between Spencers and Fertilizers is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Fertilizers and Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fertilizers and Chemicals 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 Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fertilizers and Chemicals has no effect on the direction of Spencers Retail i.e., Spencers Retail and Fertilizers go up and down completely randomly.

Pair Corralation between Spencers Retail and Fertilizers

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the Fertilizers. In addition to that, Spencers Retail is 1.04 times more volatile than Fertilizers and Chemicals. It trades about -0.01 of its total potential returns per unit of risk. Fertilizers and Chemicals is currently generating about 0.01 per unit of volatility. If you would invest  98,577  in Fertilizers and Chemicals on September 26, 2024 and sell it today you would lose (1,752) from holding Fertilizers and Chemicals or give up 1.78% of portfolio value over 90 days.

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

Spencers Retail Limited  vs.  Fertilizers and Chemicals

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

Fertilizers and Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fertilizers and Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fertilizers is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Spencers Retail and Fertilizers

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

The idea behind Spencers Retail Limited and Fertilizers and Chemicals 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.