Correlation Between MULTI CHEM and SPORTING
Can any of the company-specific risk be diversified away by investing in both MULTI CHEM and SPORTING 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 MULTI CHEM and SPORTING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MULTI CHEM LTD and SPORTING, you can compare the effects of market volatilities on MULTI CHEM and SPORTING 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 MULTI CHEM with a short position of SPORTING. Check out your portfolio center. Please also check ongoing floating volatility patterns of MULTI CHEM and SPORTING.
Diversification Opportunities for MULTI CHEM and SPORTING
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MULTI and SPORTING is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding MULTI CHEM LTD and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING and MULTI CHEM 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 MULTI CHEM LTD are associated (or correlated) with SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of MULTI CHEM i.e., MULTI CHEM and SPORTING go up and down completely randomly.
Pair Corralation between MULTI CHEM and SPORTING
Assuming the 90 days trading horizon MULTI CHEM is expected to generate 1.8 times less return on investment than SPORTING. In addition to that, MULTI CHEM is 1.62 times more volatile than SPORTING. It trades about 0.02 of its total potential returns per unit of risk. SPORTING is currently generating about 0.05 per unit of volatility. If you would invest 98.00 in SPORTING on September 23, 2024 and sell it today you would earn a total of 4.00 from holding SPORTING or generate 4.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
MULTI CHEM LTD vs. SPORTING
Performance |
Timeline |
MULTI CHEM LTD |
SPORTING |
MULTI CHEM and SPORTING Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MULTI CHEM and SPORTING
The main advantage of trading using opposite MULTI CHEM and SPORTING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MULTI CHEM position performs unexpectedly, SPORTING 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 SPORTING will offset losses from the drop in SPORTING's long position.MULTI CHEM vs. ScanSource | MULTI CHEM vs. LEGAL GENERAL | MULTI CHEM vs. SPORTING | MULTI CHEM vs. US FOODS HOLDING |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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