Correlation Between SIGNA Sports and Franchise

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

By analyzing existing cross correlation between SIGNA Sports United and Franchise Group, you can compare the effects of market volatilities on SIGNA Sports and Franchise 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 SIGNA Sports with a short position of Franchise. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIGNA Sports and Franchise.

Diversification Opportunities for SIGNA Sports and Franchise

-0.48

Correlation Coefficient

SIGNA Sports  Franchise

Very good diversification

The 3 months correlation between SIGNA and Franchise is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding SIGNA Sports United and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group and SIGNA Sports 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 SIGNA Sports United are associated (or correlated) with Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of SIGNA Sports i.e., SIGNA Sports and Franchise go up and down completely randomly.

Pair Corralation between SIGNA Sports and Franchise

Considering the 90-day investment horizon SIGNA Sports United is expected to under-perform the Franchise. In addition to that, SIGNA Sports is 2.24 times more volatile than Franchise Group. It trades about -0.05 of its total potential returns per unit of risk. Franchise Group is currently generating about 0.02 per unit of volatility. If you would invest  2,894  in Franchise Group on September 27, 2024 and sell it today you would earn a total of  76.00  from holding Franchise Group or generate 2.63% return on investment over 90 days.

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

SIGNA Sports United  vs.  Franchise Group

SIGNA Sports United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIGNA Sports United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIGNA Sports is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SIGNA Sports and Franchise

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

The idea behind SIGNA Sports United and Franchise Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.