Correlation Between Supermarket Income and M Winkworth

Can any of the company-specific risk be diversified away by investing in both Supermarket Income and M Winkworth 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 M Winkworth 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 M Winkworth PLC, you can compare the effects of market volatilities on Supermarket Income and M Winkworth 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 M Winkworth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Supermarket Income and M Winkworth.

Diversification Opportunities for Supermarket Income and M Winkworth

0.32

Correlation Coefficient

Supermarket Income  M Winkworth

Weak diversification

The 3 months correlation between Supermarket and WINK is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Supermarket Income REIT and M Winkworth PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Winkworth 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 M Winkworth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Winkworth PLC has no effect on the direction of Supermarket Income i.e., Supermarket Income and M Winkworth go up and down completely randomly.

Pair Corralation between Supermarket Income and M Winkworth

Assuming the 90 days trading horizon Supermarket Income REIT is expected to under-perform the M Winkworth. But the stock apears to be less risky and, when comparing its historical volatility, Supermarket Income REIT is 1.51 times less risky than M Winkworth. The stock trades about -0.05 of its potential returns per unit of risk. The M Winkworth PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,990  in M Winkworth PLC on October 7, 2024 and sell it today you would earn a total of  4,510  from holding M Winkworth PLC or generate 30.09% return on investment over 90 days.

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

Supermarket Income REIT  vs.  M Winkworth 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.

M Winkworth PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Supermarket Income and M Winkworth

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

The idea behind Supermarket Income REIT and M Winkworth 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.