Correlation Between Sleepless and Beldex

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

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

Diversification Opportunities for Sleepless and Beldex

0.29

Correlation Coefficient

Sleepless  Beldex

Modest diversification

The 3 months correlation between Sleepless and Beldex is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sleepless and Beldex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beldex and Sleepless 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 Sleepless are associated (or correlated) with Beldex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beldex has no effect on the direction of Sleepless i.e., Sleepless and Beldex go up and down completely randomly.

Pair Corralation between Sleepless and Beldex

Assuming the 90 days horizon Sleepless is expected to generate 2.26 times more return on investment than Beldex. However, Sleepless is 2.26 times more volatile than Beldex. It trades about 0.2 of its potential returns per unit of risk. Beldex is currently generating about 0.19 per unit of risk. If you would invest  36.00  in Sleepless on September 3, 2024 and sell it today you would earn a total of  42.00  from holding Sleepless or generate 116.67% return on investment over 90 days.

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

Sleepless  vs.  Beldex

Sleepless

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sleepless are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Sleepless exhibited solid returns over the last few months and may actually be approaching a breakup point.

Beldex

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beldex are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Beldex exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sleepless and Beldex

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

The idea behind Sleepless and Beldex 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.