Correlation Between SPARTAN STORES and RTL Group

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

By analyzing existing cross correlation between SPARTAN STORES and RTL Group SA, you can compare the effects of market volatilities on SPARTAN STORES and RTL Group 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 RTL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPARTAN STORES and RTL Group.

Diversification Opportunities for SPARTAN STORES and RTL Group

0.68

Correlation Coefficient

SPARTAN STORES  RTL Group

Poor diversification

The 3 months correlation between SPARTAN and RTL is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of SPARTAN STORES i.e., SPARTAN STORES and RTL Group go up and down completely randomly.

Pair Corralation between SPARTAN STORES and RTL Group

Assuming the 90 days trading horizon SPARTAN STORES is expected to under-perform the RTL Group. In addition to that, SPARTAN STORES is 1.18 times more volatile than RTL Group SA. It trades about -0.02 of its total potential returns per unit of risk. RTL Group SA is currently generating about -0.01 per unit of volatility. If you would invest  2,920  in RTL Group SA on October 25, 2024 and sell it today you would lose (100.00) from holding RTL Group SA or give up 3.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

SPARTAN STORES  vs.  RTL Group SA

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.

RTL Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, RTL Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPARTAN STORES and RTL Group

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

The idea behind SPARTAN STORES and RTL Group SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.