Correlation Between State Trading and Salzer Electronics

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

By analyzing existing cross correlation between The State Trading and Salzer Electronics Limited, you can compare the effects of market volatilities on State Trading and Salzer Electronics 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 State Trading with a short position of Salzer Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Trading and Salzer Electronics.

Diversification Opportunities for State Trading and Salzer Electronics

-0.23

Correlation Coefficient

State Trading  Salzer Electronics

Very good diversification

The 3 months correlation between State and Salzer is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and Salzer Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salzer Electronics and State Trading 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 The State Trading are associated (or correlated) with Salzer Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salzer Electronics has no effect on the direction of State Trading i.e., State Trading and Salzer Electronics go up and down completely randomly.

Pair Corralation between State Trading and Salzer Electronics

Assuming the 90 days trading horizon The State Trading is expected to under-perform the Salzer Electronics. In addition to that, State Trading is 1.13 times more volatile than Salzer Electronics Limited. It trades about -0.07 of its total potential returns per unit of risk. Salzer Electronics Limited is currently generating about 0.04 per unit of volatility. If you would invest  105,645  in Salzer Electronics Limited on September 3, 2024 and sell it today you would earn a total of  6,145  from holding Salzer Electronics Limited or generate 5.82% return on investment over 90 days.

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

The State Trading  vs.  Salzer Electronics Limited

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Salzer Electronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Salzer Electronics Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Salzer Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with State Trading and Salzer Electronics

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

The idea behind The State Trading and Salzer Electronics Limited 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.