Correlation Between Sparta Capital and 70082LAB3

Can any of the company-specific risk be diversified away by investing in both Sparta Capital and 70082LAB3 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 Sparta Capital and 70082LAB3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sparta Capital and US70082LAB36, you can compare the effects of market volatilities on Sparta Capital and 70082LAB3 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 Sparta Capital with a short position of 70082LAB3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparta Capital and 70082LAB3.

Diversification Opportunities for Sparta Capital and 70082LAB3

-0.65

Correlation Coefficient

Sparta Capital  70082LAB3

Excellent diversification

The 3 months correlation between Sparta and 70082LAB3 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and US70082LAB36 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US70082LAB36 and Sparta Capital 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 Sparta Capital are associated (or correlated) with 70082LAB3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US70082LAB36 has no effect on the direction of Sparta Capital i.e., Sparta Capital and 70082LAB3 go up and down completely randomly.

Pair Corralation between Sparta Capital and 70082LAB3

Assuming the 90 days horizon Sparta Capital is expected to under-perform the 70082LAB3. In addition to that, Sparta Capital is 2.26 times more volatile than US70082LAB36. It trades about -0.12 of its total potential returns per unit of risk. US70082LAB36 is currently generating about 0.11 per unit of volatility. If you would invest  8,450  in US70082LAB36 on September 17, 2024 and sell it today you would earn a total of  479.00  from holding US70082LAB36 or generate 5.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	65.63%
Values	Daily Returns

Sparta Capital  vs.  US70082LAB36

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

US70082LAB36

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US70082LAB36 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, 70082LAB3 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sparta Capital and 70082LAB3

The main advantage of trading using opposite Sparta Capital and 70082LAB3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital position performs unexpectedly, 70082LAB3 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 70082LAB3 will offset losses from the drop in 70082LAB3's long position.

The idea behind Sparta Capital and US70082LAB36 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.