Correlation Between Super Retail and Light Wonder

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

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

Diversification Opportunities for Super Retail and Light Wonder

-0.4

Correlation Coefficient

Super Retail  Light Wonder

Very good diversification

The 3 months correlation between Super and Light is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Super Retail Group and Light Wonder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Wonder and Super Retail 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 Super Retail Group are associated (or correlated) with Light Wonder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Wonder has no effect on the direction of Super Retail i.e., Super Retail and Light Wonder go up and down completely randomly.

Pair Corralation between Super Retail and Light Wonder

Assuming the 90 days trading horizon Super Retail Group is expected to under-perform the Light Wonder. But the stock apears to be less risky and, when comparing its historical volatility, Super Retail Group is 1.12 times less risky than Light Wonder. The stock trades about -0.09 of its potential returns per unit of risk. The Light Wonder is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  13,989  in Light Wonder on December 4, 2024 and sell it today you would earn a total of  4,027  from holding Light Wonder or generate 28.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Super Retail Group  vs.  Light Wonder

Super Retail Group

Risk-Adjusted Performance

Very Weak

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

Light Wonder

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Light Wonder are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Light Wonder unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Super Retail and Light Wonder

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

The idea behind Super Retail Group and Light Wonder 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.