Correlation Between Salient International and Salient Select

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

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

Diversification Opportunities for Salient International and Salient Select

0.39

Correlation Coefficient

Salient International  Salient Select

Weak diversification

The 3 months correlation between Salient and Salient is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Salient International Real and Salient Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Select Income and Salient International 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 Salient International Real are associated (or correlated) with Salient Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Select Income has no effect on the direction of Salient International i.e., Salient International and Salient Select go up and down completely randomly.

Pair Corralation between Salient International and Salient Select

Assuming the 90 days horizon Salient International Real is expected to under-perform the Salient Select. In addition to that, Salient International is 1.75 times more volatile than Salient Select Income. It trades about -0.13 of its total potential returns per unit of risk. Salient Select Income is currently generating about -0.01 per unit of volatility. If you would invest  1,942  in Salient Select Income on September 16, 2024 and sell it today you would lose (7.00) from holding Salient Select Income or give up 0.36% of portfolio value over 90 days.

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

Salient International Real  vs.  Salient Select Income

Salient International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salient International Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Salient International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Salient Select Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salient Select Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Salient Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Salient International and Salient Select

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

The idea behind Salient International Real and Salient Select Income 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.