Correlation Between SPTSX Dividend and Cobalt Power

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

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

Diversification Opportunities for SPTSX Dividend and Cobalt Power

-0.61

Correlation Coefficient

SPTSX Dividend  Cobalt Power

Excellent diversification

The 3 months correlation between SPTSX and Cobalt is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Cobalt Power Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cobalt Power Group and SPTSX Dividend 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 SPTSX Dividend Aristocrats are associated (or correlated) with Cobalt Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cobalt Power Group has no effect on the direction of SPTSX Dividend i.e., SPTSX Dividend and Cobalt Power go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Cobalt Power

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to generate 0.05 times more return on investment than Cobalt Power. However, SPTSX Dividend Aristocrats is 21.63 times less risky than Cobalt Power. It trades about 0.04 of its potential returns per unit of risk. Cobalt Power Group is currently generating about -0.18 per unit of risk. If you would invest  35,525  in SPTSX Dividend Aristocrats on September 22, 2024 and sell it today you would earn a total of  399.00  from holding SPTSX Dividend Aristocrats or generate 1.12% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Cobalt Power Group

Pair Trading with SPTSX Dividend and Cobalt Power

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

The idea behind SPTSX Dividend Aristocrats and Cobalt Power Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.