Correlation Between S P and Megachem Public

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

By analyzing existing cross correlation between S P V and Megachem Public, you can compare the effects of market volatilities on S P and Megachem Public 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 S P with a short position of Megachem Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of S P and Megachem Public.

Diversification Opportunities for S P and Megachem Public

0.82

Correlation Coefficient

S P  Megachem Public

Very poor diversification

The 3 months correlation between SPVI and Megachem is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding S P V and Megachem Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megachem Public and S P 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 S P V are associated (or correlated) with Megachem Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megachem Public has no effect on the direction of S P i.e., S P and Megachem Public go up and down completely randomly.

Pair Corralation between S P and Megachem Public

Assuming the 90 days trading horizon S P V is expected to under-perform the Megachem Public. In addition to that, S P is 1.43 times more volatile than Megachem Public. It trades about -0.31 of its total potential returns per unit of risk. Megachem Public is currently generating about -0.18 per unit of volatility. If you would invest  244.00  in Megachem Public on September 22, 2024 and sell it today you would lose (47.00) from holding Megachem Public or give up 19.26% of portfolio value over 90 days.

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

S P V  vs.  Megachem Public

S P V

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days S P V has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Megachem Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Megachem Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with S P and Megachem Public

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

The idea behind S P V and Megachem Public 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.