Correlation Between CHAR Technologies and Sparx Technology

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

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

Diversification Opportunities for CHAR Technologies and Sparx Technology

-0.74

Correlation Coefficient

CHAR Technologies  Sparx Technology

Pay attention - limited upside

The 3 months correlation between CHAR and Sparx is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding CHAR Technologies and Sparx Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparx Technology and CHAR Technologies 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 CHAR Technologies are associated (or correlated) with Sparx Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparx Technology has no effect on the direction of CHAR Technologies i.e., CHAR Technologies and Sparx Technology go up and down completely randomly.

Pair Corralation between CHAR Technologies and Sparx Technology

Assuming the 90 days horizon CHAR Technologies is expected to under-perform the Sparx Technology. But the stock apears to be less risky and, when comparing its historical volatility, CHAR Technologies is 10.62 times less risky than Sparx Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Sparx Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Sparx Technology on September 21, 2024 and sell it today you would earn a total of  2,645  from holding Sparx Technology or generate 132250.0% return on investment over 90 days.

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

CHAR Technologies  vs.  Sparx Technology

CHAR Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAR Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Sparx Technology

Risk-Adjusted Performance

10 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHAR Technologies and Sparx Technology

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

The idea behind CHAR Technologies and Sparx Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.