Correlation Between Sparinvest Value and Maj Invest

Can any of the company-specific risk be diversified away by investing in both Sparinvest Value and Maj Invest 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 Sparinvest Value and Maj Invest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sparinvest Value Emerging and Maj Invest Emerging, you can compare the effects of market volatilities on Sparinvest Value and Maj Invest 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 Sparinvest Value with a short position of Maj Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparinvest Value and Maj Invest.

Diversification Opportunities for Sparinvest Value and Maj Invest

0.92

Correlation Coefficient

Sparinvest Value  Maj Invest

Almost no diversification

The 3 months correlation between Sparinvest and Maj is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest Value Emerging and Maj Invest Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maj Invest Emerging and Sparinvest Value 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 Sparinvest Value Emerging are associated (or correlated) with Maj Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maj Invest Emerging has no effect on the direction of Sparinvest Value i.e., Sparinvest Value and Maj Invest go up and down completely randomly.

Pair Corralation between Sparinvest Value and Maj Invest

Assuming the 90 days trading horizon Sparinvest Value is expected to generate 1.38 times less return on investment than Maj Invest. But when comparing it to its historical volatility, Sparinvest Value Emerging is 1.1 times less risky than Maj Invest. It trades about 0.1 of its potential returns per unit of risk. Maj Invest Emerging is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11,050  in Maj Invest Emerging on September 14, 2024 and sell it today you would earn a total of  1,150  from holding Maj Invest Emerging or generate 10.41% return on investment over 90 days.

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

Sparinvest Value Emerging  vs.  Maj Invest Emerging

Sparinvest Value Emerging

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest Value Emerging are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite quite weak primary indicators, Sparinvest Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Maj Invest Emerging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maj Invest Emerging are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat conflicting forward-looking indicators, Maj Invest may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sparinvest Value and Maj Invest

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

The idea behind Sparinvest Value Emerging and Maj Invest Emerging 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.