Correlation Between Simple Mart and Newretail

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

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

Diversification Opportunities for Simple Mart and Newretail

0.02

Correlation Coefficient

Simple Mart  Newretail

Significant diversification

The 3 months correlation between Simple and Newretail is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Simple Mart Retail and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail and Simple Mart 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 Simple Mart Retail are associated (or correlated) with Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of Simple Mart i.e., Simple Mart and Newretail go up and down completely randomly.

Pair Corralation between Simple Mart and Newretail

Assuming the 90 days trading horizon Simple Mart Retail is expected to under-perform the Newretail. But the stock apears to be less risky and, when comparing its historical volatility, Simple Mart Retail is 4.39 times less risky than Newretail. The stock trades about -0.07 of its potential returns per unit of risk. The Newretail Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,095  in Newretail Co on October 1, 2024 and sell it today you would earn a total of  445.00  from holding Newretail Co or generate 21.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Simple Mart Retail  vs.  Newretail Co

Simple Mart Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simple Mart Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Simple Mart is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Newretail

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simple Mart and Newretail

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

The idea behind Simple Mart Retail and Newretail Co 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.