Correlation Between BankInvest Emerging and Sparinvest Value

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

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

Diversification Opportunities for BankInvest Emerging and Sparinvest Value

0.66

Correlation Coefficient

BankInvest Emerging  Sparinvest Value

Poor diversification

The 3 months correlation between BankInvest and Sparinvest is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Emerging and Sparinvest Value Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest Value Emerging and BankInvest Emerging 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 BankInvest Emerging are associated (or correlated) with Sparinvest Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest Value Emerging has no effect on the direction of BankInvest Emerging i.e., BankInvest Emerging and Sparinvest Value go up and down completely randomly.

Pair Corralation between BankInvest Emerging and Sparinvest Value

Assuming the 90 days trading horizon BankInvest Emerging is expected to generate 4.11 times less return on investment than Sparinvest Value. But when comparing it to its historical volatility, BankInvest Emerging is 4.39 times less risky than Sparinvest Value. It trades about 0.09 of its potential returns per unit of risk. Sparinvest Value Emerging is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  13,650  in Sparinvest Value Emerging on September 13, 2024 and sell it today you would earn a total of  850.00  from holding Sparinvest Value Emerging or generate 6.23% return on investment over 90 days.

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

BankInvest Emerging  vs.  Sparinvest Value Emerging

BankInvest Emerging

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Emerging are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, BankInvest Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sparinvest Value Emerging

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest Value Emerging are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite quite conflicting primary indicators, Sparinvest Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BankInvest Emerging and Sparinvest Value

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

The idea behind BankInvest Emerging and Sparinvest Value Emerging 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.