Correlation Between Winpak and Supremex

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

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

Diversification Opportunities for Winpak and Supremex

-0.04

Correlation Coefficient

Winpak  Supremex

Good diversification

The 3 months correlation between Winpak and Supremex is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Winpak and Supremex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supremex and Winpak 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 Winpak are associated (or correlated) with Supremex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supremex has no effect on the direction of Winpak i.e., Winpak and Supremex go up and down completely randomly.

Pair Corralation between Winpak and Supremex

Assuming the 90 days trading horizon Winpak is expected to under-perform the Supremex. In addition to that, Winpak is 1.45 times more volatile than Supremex. It trades about -0.13 of its total potential returns per unit of risk. Supremex is currently generating about -0.17 per unit of volatility. If you would invest  400.00  in Supremex on September 26, 2024 and sell it today you would lose (16.00) from holding Supremex or give up 4.0% of portfolio value over 90 days.

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

Winpak  vs.  Supremex

Winpak

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Winpak are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, Winpak is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 very healthy basic indicators, Supremex is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Winpak and Supremex

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

The idea behind Winpak and Supremex 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.