Correlation Between Silver Spike and Zoetis

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

By analyzing existing cross correlation between Silver Spike Investment and Zoetis Inc, you can compare the effects of market volatilities on Silver Spike and Zoetis 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 Silver Spike with a short position of Zoetis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silver Spike and Zoetis.

Diversification Opportunities for Silver Spike and Zoetis

-0.9

Correlation Coefficient

Silver Spike  Zoetis

Pay attention - limited upside

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

Pair Corralation between Silver Spike and Zoetis

Given the investment horizon of 90 days Silver Spike Investment is expected to generate 1.03 times more return on investment than Zoetis. However, Silver Spike is 1.03 times more volatile than Zoetis Inc. It trades about 0.11 of its potential returns per unit of risk. Zoetis Inc is currently generating about 0.02 per unit of risk. If you would invest  813.00  in Silver Spike Investment on September 21, 2024 and sell it today you would earn a total of  467.00  from holding Silver Spike Investment or generate 57.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.17%
Values	Daily Returns

Silver Spike Investment  vs.  Zoetis Inc

Silver Spike Investment

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Silver Spike Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile forward indicators, Silver Spike exhibited solid returns over the last few months and may actually be approaching a breakup point.

Zoetis Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoetis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Silver Spike and Zoetis

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

The idea behind Silver Spike Investment and Zoetis Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.