Correlation Between Spencers Retail and Tree House

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

Diversification Opportunities for Spencers Retail and Tree House

0.77

Correlation Coefficient

Spencers Retail  Tree House

Poor diversification

The 3 months correlation between Spencers and Tree is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Tree House Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tree House Education 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 Tree House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tree House Education has no effect on the direction of Spencers Retail i.e., Spencers Retail and Tree House go up and down completely randomly.

Pair Corralation between Spencers Retail and Tree House

Assuming the 90 days trading horizon Spencers Retail Limited is expected to generate 1.23 times more return on investment than Tree House. However, Spencers Retail is 1.23 times more volatile than Tree House Education. It trades about -0.07 of its potential returns per unit of risk. Tree House Education is currently generating about -0.3 per unit of risk. If you would invest  8,040  in Spencers Retail Limited on December 28, 2024 and sell it today you would lose (1,590) from holding Spencers Retail Limited or give up 19.78% of portfolio value over 90 days.

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

Spencers Retail Limited  vs.  Tree House Education

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

Tree House Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tree House Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Spencers Retail and Tree House

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

The idea behind Spencers Retail Limited and Tree House Education 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.