Correlation Between Sapphire Foods and Generic Engineering

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

By analyzing existing cross correlation between Sapphire Foods India and Generic Engineering Construction, you can compare the effects of market volatilities on Sapphire Foods and Generic Engineering 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 Sapphire Foods with a short position of Generic Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sapphire Foods and Generic Engineering.

Diversification Opportunities for Sapphire Foods and Generic Engineering

0.19

Correlation Coefficient

Sapphire Foods  Generic Engineering

Average diversification

The 3 months correlation between Sapphire and Generic is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sapphire Foods India and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering and Sapphire Foods 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 Sapphire Foods India are associated (or correlated) with Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of Sapphire Foods i.e., Sapphire Foods and Generic Engineering go up and down completely randomly.

Pair Corralation between Sapphire Foods and Generic Engineering

Assuming the 90 days trading horizon Sapphire Foods is expected to generate 3.58 times less return on investment than Generic Engineering. But when comparing it to its historical volatility, Sapphire Foods India is 1.49 times less risky than Generic Engineering. It trades about 0.1 of its potential returns per unit of risk. Generic Engineering Construction is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,982  in Generic Engineering Construction on September 23, 2024 and sell it today you would earn a total of  588.00  from holding Generic Engineering Construction or generate 14.77% return on investment over 90 days.

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

Sapphire Foods India  vs.  Generic Engineering Constructi

Sapphire Foods India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapphire Foods India has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Generic Engineering

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Generic Engineering may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sapphire Foods and Generic Engineering

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

The idea behind Sapphire Foods India and Generic Engineering Construction 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.