Correlation Between S P and North East

Can any of the company-specific risk be diversified away by investing in both S P and North East 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 North East 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 North East Rubbers, you can compare the effects of market volatilities on S P and North East 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 North East. Check out your portfolio center. Please also check ongoing floating volatility patterns of S P and North East.

Diversification Opportunities for S P and North East

0.9

Correlation Coefficient

S P  North East

Almost no diversification

The 3 months correlation between SPVI and North is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding S P V and North East Rubbers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North East Rubbers 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 North East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North East Rubbers has no effect on the direction of S P i.e., S P and North East go up and down completely randomly.

Pair Corralation between S P and North East

Assuming the 90 days trading horizon S P V is expected to generate 28.19 times more return on investment than North East. However, S P is 28.19 times more volatile than North East Rubbers. It trades about 0.04 of its potential returns per unit of risk. North East Rubbers is currently generating about -0.01 per unit of risk. If you would invest  489.00  in S P V on October 5, 2024 and sell it today you would lose (308.00) from holding S P V or give up 62.99% of portfolio value over 90 days.

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

S P V  vs.  North East Rubbers

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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

North East Rubbers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North East Rubbers 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 February 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 North East

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

The idea behind S P V and North East Rubbers 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 Global Correlations module to find global opportunities by holding instruments from different markets.