Correlation Between Supermarket Income and Dotdigital Group

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

By analyzing existing cross correlation between Supermarket Income REIT and Dotdigital Group Plc, you can compare the effects of market volatilities on Supermarket Income and Dotdigital Group 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 Supermarket Income with a short position of Dotdigital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Supermarket Income and Dotdigital Group.

Diversification Opportunities for Supermarket Income and Dotdigital Group

-0.54

Correlation Coefficient

Supermarket Income  Dotdigital Group

Excellent diversification

The 3 months correlation between Supermarket and Dotdigital is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Supermarket Income REIT and Dotdigital Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dotdigital Group Plc and Supermarket Income 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 Supermarket Income REIT are associated (or correlated) with Dotdigital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dotdigital Group Plc has no effect on the direction of Supermarket Income i.e., Supermarket Income and Dotdigital Group go up and down completely randomly.

Pair Corralation between Supermarket Income and Dotdigital Group

Assuming the 90 days trading horizon Supermarket Income REIT is expected to under-perform the Dotdigital Group. But the stock apears to be less risky and, when comparing its historical volatility, Supermarket Income REIT is 2.58 times less risky than Dotdigital Group. The stock trades about -0.03 of its potential returns per unit of risk. The Dotdigital Group Plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,000  in Dotdigital Group Plc on September 4, 2024 and sell it today you would earn a total of  540.00  from holding Dotdigital Group Plc or generate 6.0% return on investment over 90 days.

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

Supermarket Income REIT  vs.  Dotdigital Group Plc

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dotdigital Group Plc

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Supermarket Income and Dotdigital Group

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

The idea behind Supermarket Income REIT and Dotdigital Group Plc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.