Correlation Between State Trading and Speciality Restaurants

Can any of the company-specific risk be diversified away by investing in both State Trading and Speciality Restaurants 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 Speciality Restaurants 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 Speciality Restaurants Limited, you can compare the effects of market volatilities on State Trading and Speciality Restaurants 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 Speciality Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Trading and Speciality Restaurants.

Diversification Opportunities for State Trading and Speciality Restaurants

0.76

Correlation Coefficient

State Trading  Speciality Restaurants

Poor diversification

The 3 months correlation between State and Speciality is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding The State Trading and Speciality Restaurants Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Speciality Restaurants 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 Speciality Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Speciality Restaurants has no effect on the direction of State Trading i.e., State Trading and Speciality Restaurants go up and down completely randomly.

Pair Corralation between State Trading and Speciality Restaurants

Assuming the 90 days trading horizon The State Trading is expected to under-perform the Speciality Restaurants. In addition to that, State Trading is 1.24 times more volatile than Speciality Restaurants Limited. It trades about -0.15 of its total potential returns per unit of risk. Speciality Restaurants Limited is currently generating about -0.08 per unit of volatility. If you would invest  15,257  in Speciality Restaurants Limited on November 29, 2024 and sell it today you would lose (1,863) from holding Speciality Restaurants Limited or give up 12.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

The State Trading  vs.  Speciality Restaurants Limited

State Trading

Risk-Adjusted Performance

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 March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Speciality Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with State Trading and Speciality Restaurants

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

The idea behind The State Trading and Speciality Restaurants 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.