Correlation Between Spencers Retail and NCC

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

Diversification Opportunities for Spencers Retail and NCC

0.45

Correlation Coefficient

Spencers Retail  NCC

Very weak diversification

The 3 months correlation between Spencers and NCC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and NCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCC 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 NCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCC Limited has no effect on the direction of Spencers Retail i.e., Spencers Retail and NCC go up and down completely randomly.

Pair Corralation between Spencers Retail and NCC

Assuming the 90 days trading horizon Spencers Retail is expected to generate 2.57 times less return on investment than NCC. In addition to that, Spencers Retail is 1.11 times more volatile than NCC Limited. It trades about 0.03 of its total potential returns per unit of risk. NCC Limited is currently generating about 0.09 per unit of volatility. If you would invest  8,766  in NCC Limited on October 23, 2024 and sell it today you would earn a total of  16,244  from holding NCC Limited or generate 185.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Spencers Retail Limited  vs.  NCC 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.

NCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Spencers Retail and NCC

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

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