Correlation Between Sporton International and Choice Development

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

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

Diversification Opportunities for Sporton International and Choice Development

0.24

Correlation Coefficient

Sporton International  Choice Development

Modest diversification

The 3 months correlation between Sporton and Choice is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sporton International and Choice Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Development and Sporton International 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 Sporton International are associated (or correlated) with Choice Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Development has no effect on the direction of Sporton International i.e., Sporton International and Choice Development go up and down completely randomly.

Pair Corralation between Sporton International and Choice Development

Assuming the 90 days trading horizon Sporton International is expected to under-perform the Choice Development. But the stock apears to be less risky and, when comparing its historical volatility, Sporton International is 1.22 times less risky than Choice Development. The stock trades about -0.06 of its potential returns per unit of risk. The Choice Development is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,655  in Choice Development on September 12, 2024 and sell it today you would lose (60.00) from holding Choice Development or give up 3.63% of portfolio value over 90 days.

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

Sporton International  vs.  Choice Development

Sporton International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Choice Development

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sporton International and Choice Development

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

The idea behind Sporton International and Choice Development 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.