Correlation Between Simt Sp and Sentinel Common

Can any of the company-specific risk be diversified away by investing in both Simt Sp and Sentinel Common 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 Simt Sp and Sentinel Common into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Simt Sp 500 and Sentinel Mon Stock, you can compare the effects of market volatilities on Simt Sp and Sentinel Common 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 Simt Sp with a short position of Sentinel Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simt Sp and Sentinel Common.

Diversification Opportunities for Simt Sp and Sentinel Common

0.97

Correlation Coefficient

Simt Sp  Sentinel Common

Almost no diversification

The 3 months correlation between Simt and Sentinel is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Simt Sp 500 and Sentinel Mon Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Mon Stock and Simt Sp 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 Simt Sp 500 are associated (or correlated) with Sentinel Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Mon Stock has no effect on the direction of Simt Sp i.e., Simt Sp and Sentinel Common go up and down completely randomly.

Pair Corralation between Simt Sp and Sentinel Common

Assuming the 90 days horizon Simt Sp 500 is expected to under-perform the Sentinel Common. In addition to that, Simt Sp is 1.0 times more volatile than Sentinel Mon Stock. It trades about -0.08 of its total potential returns per unit of risk. Sentinel Mon Stock is currently generating about -0.07 per unit of volatility. If you would invest  7,095  in Sentinel Mon Stock on December 29, 2024 and sell it today you would lose (307.00) from holding Sentinel Mon Stock or give up 4.33% of portfolio value over 90 days.

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

Simt Sp 500  vs.  Sentinel Mon Stock

Simt Sp 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simt Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Simt Sp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sentinel Mon Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentinel Mon Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sentinel Common is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Simt Sp and Sentinel Common

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

The idea behind Simt Sp 500 and Sentinel Mon Stock 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.