Correlation Between S P and TAC Consumer

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

Diversification Opportunities for S P and TAC Consumer

0.9

Correlation Coefficient

S P  TAC Consumer

Almost no diversification

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

Pair Corralation between S P and TAC Consumer

Assuming the 90 days trading horizon S P V is expected to generate 27.12 times more return on investment than TAC Consumer. However, S P is 27.12 times more volatile than TAC Consumer Public. It trades about 0.04 of its potential returns per unit of risk. TAC Consumer Public is currently generating about -0.01 per unit of risk. If you would invest  517.00  in S P V on September 22, 2024 and sell it today you would lose (338.00) from holding S P V or give up 65.38% 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.  TAC Consumer 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.

TAC Consumer Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TAC Consumer Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with S P and TAC Consumer

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

The idea behind S P V and TAC Consumer 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.