Correlation Between Sound Shore and Mairs Power

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

By analyzing existing cross correlation between Sound Shore Fund and Mairs Power Growth, you can compare the effects of market volatilities on Sound Shore and Mairs Power 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 Sound Shore with a short position of Mairs Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Shore and Mairs Power.

Diversification Opportunities for Sound Shore and Mairs Power

0.37

Correlation Coefficient

Sound Shore  Mairs Power

Weak diversification

The 3 months correlation between Sound and Mairs is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sound Shore Fund and Mairs Power Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mairs Power Growth and Sound Shore 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 Sound Shore Fund are associated (or correlated) with Mairs Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mairs Power Growth has no effect on the direction of Sound Shore i.e., Sound Shore and Mairs Power go up and down completely randomly.

Pair Corralation between Sound Shore and Mairs Power

Assuming the 90 days horizon Sound Shore Fund is expected to generate 0.85 times more return on investment than Mairs Power. However, Sound Shore Fund is 1.18 times less risky than Mairs Power. It trades about -0.02 of its potential returns per unit of risk. Mairs Power Growth is currently generating about -0.06 per unit of risk. If you would invest  3,835  in Sound Shore Fund on December 28, 2024 and sell it today you would lose (52.00) from holding Sound Shore Fund or give up 1.36% of portfolio value over 90 days.

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

Sound Shore Fund  vs.  Mairs Power Growth

Sound Shore Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sound Shore Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sound Shore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mairs Power Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mairs Power Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Mairs Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sound Shore and Mairs Power

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

The idea behind Sound Shore Fund and Mairs Power Growth 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 Commodity Directory module to find actively traded commodities issued by global exchanges.