Correlation Between Sparinvest INDEX and Sparinvest SICAV

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

By analyzing existing cross correlation between Sparinvest INDEX Hj and Sparinvest SICAV Procedo, you can compare the effects of market volatilities on Sparinvest INDEX and Sparinvest SICAV 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 Sparinvest INDEX with a short position of Sparinvest SICAV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparinvest INDEX and Sparinvest SICAV.

Diversification Opportunities for Sparinvest INDEX and Sparinvest SICAV

0.8

Correlation Coefficient

Sparinvest INDEX  Sparinvest SICAV

Very poor diversification

The 3 months correlation between Sparinvest and Sparinvest is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Hj and Sparinvest SICAV Procedo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest SICAV Procedo and Sparinvest INDEX 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 Sparinvest INDEX Hj are associated (or correlated) with Sparinvest SICAV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest SICAV Procedo has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and Sparinvest SICAV go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Sparinvest SICAV

Assuming the 90 days trading horizon Sparinvest INDEX Hj is expected to under-perform the Sparinvest SICAV. But the fund apears to be less risky and, when comparing its historical volatility, Sparinvest INDEX Hj is 1.08 times less risky than Sparinvest SICAV. The fund trades about -0.12 of its potential returns per unit of risk. The Sparinvest SICAV Procedo is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  26,650  in Sparinvest SICAV Procedo on December 30, 2024 and sell it today you would lose (520.00) from holding Sparinvest SICAV Procedo or give up 1.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Sparinvest INDEX Hj  vs.  Sparinvest SICAV Procedo

Sparinvest INDEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparinvest INDEX Hj has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent technical indicators, Sparinvest INDEX is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sparinvest SICAV Procedo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparinvest SICAV Procedo has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical and fundamental indicators, Sparinvest SICAV is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sparinvest INDEX and Sparinvest SICAV

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

The idea behind Sparinvest INDEX Hj and Sparinvest SICAV Procedo 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.