Correlation Between New Momentum and SosTravel SPA

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

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

Diversification Opportunities for New Momentum and SosTravel SPA

0.0

Correlation Coefficient

New Momentum  SosTravel SPA

Pay attention - limited upside

The 3 months correlation between New and SosTravel is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding New Momentum and SosTravel SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SosTravel SPA and New Momentum 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 New Momentum are associated (or correlated) with SosTravel SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SosTravel SPA has no effect on the direction of New Momentum i.e., New Momentum and SosTravel SPA go up and down completely randomly.

Pair Corralation between New Momentum and SosTravel SPA

Given the investment horizon of 90 days New Momentum is expected to generate 11.22 times more return on investment than SosTravel SPA. However, New Momentum is 11.22 times more volatile than SosTravel SPA. It trades about 0.03 of its potential returns per unit of risk. SosTravel SPA is currently generating about 0.02 per unit of risk. If you would invest  0.98  in New Momentum on September 26, 2024 and sell it today you would lose (0.93) from holding New Momentum or give up 94.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

New Momentum  vs.  SosTravel SPA

New Momentum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Momentum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, New Momentum showed solid returns over the last few months and may actually be approaching a breakup point.

SosTravel SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SosTravel SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SosTravel SPA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with New Momentum and SosTravel SPA

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

The idea behind New Momentum and SosTravel SPA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.