Correlation Between Spuntech and Neto ME

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

By analyzing existing cross correlation between Spuntech and Neto ME Holdings, you can compare the effects of market volatilities on Spuntech and Neto ME 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 Spuntech with a short position of Neto ME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spuntech and Neto ME.

Diversification Opportunities for Spuntech and Neto ME

-0.58

Correlation Coefficient

Spuntech  Neto ME

Excellent diversification

The 3 months correlation between Spuntech and Neto is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Spuntech and Neto ME Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neto ME Holdings and Spuntech 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 Spuntech are associated (or correlated) with Neto ME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neto ME Holdings has no effect on the direction of Spuntech i.e., Spuntech and Neto ME go up and down completely randomly.

Pair Corralation between Spuntech and Neto ME

Assuming the 90 days trading horizon Spuntech is expected to under-perform the Neto ME. But the stock apears to be less risky and, when comparing its historical volatility, Spuntech is 1.72 times less risky than Neto ME. The stock trades about -0.13 of its potential returns per unit of risk. The Neto ME Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,395,000  in Neto ME Holdings on December 4, 2024 and sell it today you would earn a total of  55,000  from holding Neto ME Holdings or generate 3.94% return on investment over 90 days.

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

Spuntech  vs.  Neto ME Holdings

Spuntech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spuntech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Spuntech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Neto ME Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neto ME Holdings are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Neto ME sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spuntech and Neto ME

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

The idea behind Spuntech and Neto ME Holdings 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.