Correlation Between STOMO MITSUI and SPARTAN STORES

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

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

Diversification Opportunities for STOMO MITSUI and SPARTAN STORES

-0.69

Correlation Coefficient

STOMO MITSUI  SPARTAN STORES

Excellent diversification

The 3 months correlation between STOMO and SPARTAN is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding STOMO MITSUI FINL and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES and STOMO MITSUI 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 STOMO MITSUI FINL 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 STOMO MITSUI i.e., STOMO MITSUI and SPARTAN STORES go up and down completely randomly.

Pair Corralation between STOMO MITSUI and SPARTAN STORES

Assuming the 90 days trading horizon STOMO MITSUI FINL is expected to generate 0.78 times more return on investment than SPARTAN STORES. However, STOMO MITSUI FINL is 1.28 times less risky than SPARTAN STORES. It trades about 0.18 of its potential returns per unit of risk. SPARTAN STORES is currently generating about -0.06 per unit of risk. If you would invest  1,907  in STOMO MITSUI FINL on October 25, 2024 and sell it today you would earn a total of  416.00  from holding STOMO MITSUI FINL or generate 21.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

STOMO MITSUI FINL  vs.  SPARTAN STORES

STOMO MITSUI FINL

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STOMO MITSUI FINL are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, STOMO MITSUI unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady 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 STOMO MITSUI and SPARTAN STORES

The main advantage of trading using opposite STOMO MITSUI and SPARTAN STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STOMO MITSUI 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 STOMO MITSUI FINL 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.