Correlation Between Sparx Technology and Western Investment

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

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

Diversification Opportunities for Sparx Technology and Western Investment

0.39

Correlation Coefficient

Sparx Technology  Western Investment

Weak diversification

The 3 months correlation between Sparx and Western is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sparx Technology and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment and Sparx Technology 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 Sparx Technology are associated (or correlated) with Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Sparx Technology i.e., Sparx Technology and Western Investment go up and down completely randomly.

Pair Corralation between Sparx Technology and Western Investment

Assuming the 90 days trading horizon Sparx Technology is expected to under-perform the Western Investment. In addition to that, Sparx Technology is 1.26 times more volatile than Western Investment. It trades about -0.1 of its total potential returns per unit of risk. Western Investment is currently generating about -0.01 per unit of volatility. If you would invest  57.00  in Western Investment on December 28, 2024 and sell it today you would lose (2.00) from holding Western Investment or give up 3.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Sparx Technology  vs.  Western Investment

Sparx Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparx Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Western Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Western Investment is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Sparx Technology and Western Investment

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

The idea behind Sparx Technology and Western Investment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.