Correlation Between Associated Alcohols and Spencers Retail

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

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

Diversification Opportunities for Associated Alcohols and Spencers Retail

-0.12

Correlation Coefficient

Associated Alcohols  Spencers Retail

Good diversification

The 3 months correlation between Associated and Spencers is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and Spencers Retail go up and down completely randomly.

Pair Corralation between Associated Alcohols and Spencers Retail

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 1.38 times more return on investment than Spencers Retail. However, Associated Alcohols is 1.38 times more volatile than Spencers Retail Limited. It trades about 0.32 of its potential returns per unit of risk. Spencers Retail Limited is currently generating about -0.05 per unit of risk. If you would invest  92,995  in Associated Alcohols Breweries on September 24, 2024 and sell it today you would earn a total of  17,300  from holding Associated Alcohols Breweries or generate 18.6% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  Spencers Retail Limited

Associated Alcohols

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Associated Alcohols and Spencers Retail

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

The idea behind Associated Alcohols Breweries and Spencers Retail 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.