Correlation Between VARNO and Sanyo Special

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

By analyzing existing cross correlation between VARNO 75 15 JAN 28 and Sanyo Special Steel, you can compare the effects of market volatilities on VARNO and Sanyo Special 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 VARNO with a short position of Sanyo Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARNO and Sanyo Special.

Diversification Opportunities for VARNO and Sanyo Special

-0.39

Correlation Coefficient

VARNO  Sanyo Special

Very good diversification

The 3 months correlation between VARNO and Sanyo is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding VARNO 75 15 JAN 28 and Sanyo Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Special Steel and VARNO 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 VARNO 75 15 JAN 28 are associated (or correlated) with Sanyo Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Special Steel has no effect on the direction of VARNO i.e., VARNO and Sanyo Special go up and down completely randomly.

Pair Corralation between VARNO and Sanyo Special

Assuming the 90 days trading horizon VARNO 75 15 JAN 28 is expected to under-perform the Sanyo Special. In addition to that, VARNO is 2.82 times more volatile than Sanyo Special Steel. It trades about -0.18 of its total potential returns per unit of risk. Sanyo Special Steel is currently generating about 0.13 per unit of volatility. If you would invest  1,834  in Sanyo Special Steel on September 14, 2024 and sell it today you would earn a total of  13.00  from holding Sanyo Special Steel or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.43%
Values	Daily Returns

VARNO 75 15 JAN 28  vs.  Sanyo Special Steel

VARNO 75 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARNO 75 15 JAN 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VARNO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sanyo Special Steel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sanyo Special Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Sanyo Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VARNO and Sanyo Special

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

The idea behind VARNO 75 15 JAN 28 and Sanyo Special Steel 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.