Correlation Between Supremex and Reitmans

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

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

Diversification Opportunities for Supremex and Reitmans

0.51

Correlation Coefficient

Supremex  Reitmans

Very weak diversification

The 3 months correlation between Supremex and Reitmans is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Supremex and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans Limited and Supremex 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 Supremex are associated (or correlated) with Reitmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans Limited has no effect on the direction of Supremex i.e., Supremex and Reitmans go up and down completely randomly.

Pair Corralation between Supremex and Reitmans

Assuming the 90 days trading horizon Supremex is expected to under-perform the Reitmans. But the stock apears to be less risky and, when comparing its historical volatility, Supremex is 1.98 times less risky than Reitmans. The stock trades about -0.15 of its potential returns per unit of risk. The Reitmans Limited is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  261.00  in Reitmans Limited on October 9, 2024 and sell it today you would lose (9.00) from holding Reitmans Limited or give up 3.45% of portfolio value over 90 days.

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

Supremex  vs.  Reitmans Limited

Supremex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supremex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Reitmans Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reitmans Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Reitmans is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Supremex and Reitmans

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

The idea behind Supremex and Reitmans 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.