Correlation Between SPARTAN STORES and SWISS WATER

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

By analyzing existing cross correlation between SPARTAN STORES and SWISS WATER DECAFFCOFFEE, you can compare the effects of market volatilities on SPARTAN STORES and SWISS WATER 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 SPARTAN STORES with a short position of SWISS WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPARTAN STORES and SWISS WATER.

Diversification Opportunities for SPARTAN STORES and SWISS WATER

-0.5

Correlation Coefficient

SPARTAN STORES  SWISS WATER

Very good diversification

The 3 months correlation between SPARTAN and SWISS is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE and SPARTAN STORES 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 SPARTAN STORES are associated (or correlated) with SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of SPARTAN STORES i.e., SPARTAN STORES and SWISS WATER go up and down completely randomly.

Pair Corralation between SPARTAN STORES and SWISS WATER

Assuming the 90 days trading horizon SPARTAN STORES is expected to under-perform the SWISS WATER. But the stock apears to be less risky and, when comparing its historical volatility, SPARTAN STORES is 1.84 times less risky than SWISS WATER. The stock trades about -0.08 of its potential returns per unit of risk. The SWISS WATER DECAFFCOFFEE is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  268.00  in SWISS WATER DECAFFCOFFEE on October 4, 2024 and sell it today you would lose (8.00) from holding SWISS WATER DECAFFCOFFEE or give up 2.99% of portfolio value over 90 days.

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

SPARTAN STORES  vs.  SWISS WATER DECAFFCOFFEE

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SWISS WATER reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPARTAN STORES and SWISS WATER

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

The idea behind SPARTAN STORES and SWISS WATER DECAFFCOFFEE 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.