Correlation Between Tier1 Technology and Squirrel Media

Can any of the company-specific risk be diversified away by investing in both Tier1 Technology and Squirrel Media 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 Tier1 Technology and Squirrel Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tier1 Technology SA and Squirrel Media SA, you can compare the effects of market volatilities on Tier1 Technology and Squirrel Media 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 Tier1 Technology with a short position of Squirrel Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tier1 Technology and Squirrel Media.

Diversification Opportunities for Tier1 Technology and Squirrel Media

0.27

Correlation Coefficient

Tier1 Technology  Squirrel Media

Modest diversification

The 3 months correlation between Tier1 and Squirrel is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tier1 Technology SA and Squirrel Media SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Squirrel Media SA and Tier1 Technology 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 Tier1 Technology SA are associated (or correlated) with Squirrel Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Squirrel Media SA has no effect on the direction of Tier1 Technology i.e., Tier1 Technology and Squirrel Media go up and down completely randomly.

Pair Corralation between Tier1 Technology and Squirrel Media

Assuming the 90 days trading horizon Tier1 Technology SA is expected to generate 0.8 times more return on investment than Squirrel Media. However, Tier1 Technology SA is 1.24 times less risky than Squirrel Media. It trades about 0.05 of its potential returns per unit of risk. Squirrel Media SA is currently generating about 0.01 per unit of risk. If you would invest  187.00  in Tier1 Technology SA on December 4, 2024 and sell it today you would earn a total of  113.00  from holding Tier1 Technology SA or generate 60.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.02%
Values	Daily Returns

Tier1 Technology SA  vs.  Squirrel Media SA

Tier1 Technology

Risk-Adjusted Performance

OK

Over the last 90 days Tier1 Technology SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tier1 Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Squirrel Media SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Squirrel Media SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Squirrel Media exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tier1 Technology and Squirrel Media

The main advantage of trading using opposite Tier1 Technology and Squirrel Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tier1 Technology position performs unexpectedly, Squirrel Media 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 Squirrel Media will offset losses from the drop in Squirrel Media's long position.

The idea behind Tier1 Technology SA and Squirrel Media SA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.