Correlation Between Qinetiq Group and Sovereign Metals

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

By analyzing existing cross correlation between Qinetiq Group PLC and Sovereign Metals, you can compare the effects of market volatilities on Qinetiq Group and Sovereign Metals 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 Qinetiq Group with a short position of Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qinetiq Group and Sovereign Metals.

Diversification Opportunities for Qinetiq Group and Sovereign Metals

-0.63

Correlation Coefficient

Qinetiq Group  Sovereign Metals

Excellent diversification

The 3 months correlation between Qinetiq and Sovereign is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Qinetiq Group PLC and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and Qinetiq Group 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 Qinetiq Group PLC are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Qinetiq Group i.e., Qinetiq Group and Sovereign Metals go up and down completely randomly.

Pair Corralation between Qinetiq Group and Sovereign Metals

Assuming the 90 days trading horizon Qinetiq Group PLC is expected to under-perform the Sovereign Metals. But the stock apears to be less risky and, when comparing its historical volatility, Qinetiq Group PLC is 1.47 times less risky than Sovereign Metals. The stock trades about -0.1 of its potential returns per unit of risk. The Sovereign Metals is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Sovereign Metals on September 12, 2024 and sell it today you would earn a total of  1,000.00  from holding Sovereign Metals or generate 33.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Qinetiq Group PLC  vs.  Sovereign Metals

Qinetiq Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qinetiq Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sovereign Metals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sovereign Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qinetiq Group and Sovereign Metals

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

The idea behind Qinetiq Group PLC and Sovereign Metals 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.