Correlation Between Werner Enterprises and SPARTAN STORES

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

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

Diversification Opportunities for Werner Enterprises and SPARTAN STORES

-0.38

Correlation Coefficient

Werner Enterprises  SPARTAN STORES

Very good diversification

The 3 months correlation between Werner and SPARTAN is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES and Werner Enterprises 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 Werner Enterprises are associated (or correlated) with SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of Werner Enterprises i.e., Werner Enterprises and SPARTAN STORES go up and down completely randomly.

Pair Corralation between Werner Enterprises and SPARTAN STORES

Assuming the 90 days trading horizon Werner Enterprises is expected to under-perform the SPARTAN STORES. But the stock apears to be less risky and, when comparing its historical volatility, Werner Enterprises is 1.16 times less risky than SPARTAN STORES. The stock trades about -0.31 of its potential returns per unit of risk. The SPARTAN STORES is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,790  in SPARTAN STORES on October 11, 2024 and sell it today you would lose (60.00) from holding SPARTAN STORES or give up 3.35% of portfolio value over 90 days.

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

Werner Enterprises  vs.  SPARTAN STORES

Werner Enterprises

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Werner Enterprises are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Werner Enterprises is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Werner Enterprises and SPARTAN STORES

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

The idea behind Werner Enterprises and SPARTAN STORES 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.