Correlation Between Superior Plus and Sovereign Metals

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

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

Diversification Opportunities for Superior Plus and Sovereign Metals

-0.75

Correlation Coefficient

Superior Plus  Sovereign Metals

Pay attention - limited upside

The 3 months correlation between Superior and Sovereign is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Sovereign Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Superior Plus i.e., Superior Plus and Sovereign Metals go up and down completely randomly.

Pair Corralation between Superior Plus and Sovereign Metals

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Sovereign Metals. But the stock apears to be less risky and, when comparing its historical volatility, Superior Plus Corp is 1.45 times less risky than Sovereign Metals. The stock trades about -0.07 of its potential returns per unit of risk. The Sovereign Metals Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Sovereign Metals Limited on September 19, 2024 and sell it today you would earn a total of  10.00  from holding Sovereign Metals Limited or generate 27.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.22%
Values	Daily Returns

Superior Plus Corp  vs.  Sovereign Metals Limited

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sovereign Metals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sovereign Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Plus and Sovereign Metals

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

The idea behind Superior Plus Corp and Sovereign Metals Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.