Correlation Between Warrix Sport and SG Capital

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

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

Diversification Opportunities for Warrix Sport and SG Capital

0.44

Correlation Coefficient

Warrix Sport  SG Capital

Very weak diversification

The 3 months correlation between Warrix and SGC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Warrix Sport PCL and SG Capital PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SG Capital PCL and Warrix Sport 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 Warrix Sport PCL are associated (or correlated) with SG Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SG Capital PCL has no effect on the direction of Warrix Sport i.e., Warrix Sport and SG Capital go up and down completely randomly.

Pair Corralation between Warrix Sport and SG Capital

Assuming the 90 days trading horizon Warrix Sport PCL is expected to generate 0.78 times more return on investment than SG Capital. However, Warrix Sport PCL is 1.27 times less risky than SG Capital. It trades about -0.1 of its potential returns per unit of risk. SG Capital PCL is currently generating about -0.2 per unit of risk. If you would invest  382.00  in Warrix Sport PCL on December 2, 2024 and sell it today you would lose (24.00) from holding Warrix Sport PCL or give up 6.28% of portfolio value over 90 days.

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

Warrix Sport PCL  vs.  SG Capital PCL

Warrix Sport PCL

Risk-Adjusted Performance

Very Weak

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

SG Capital PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days SG Capital PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Warrix Sport and SG Capital

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

The idea behind Warrix Sport PCL and SG Capital PCL 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.