Correlation Between Space and Partner

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

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

Diversification Opportunities for Space and Partner

0.0

Correlation Coefficient

Space  Partner

Pay attention - limited upside

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

Pair Corralation between Space and Partner

Assuming the 90 days trading horizon Space Com is expected to under-perform the Partner. In addition to that, Space is 2.6 times more volatile than Partner. It trades about -0.05 of its total potential returns per unit of risk. Partner is currently generating about 0.09 per unit of volatility. If you would invest  155,600  in Partner on September 14, 2024 and sell it today you would earn a total of  70,800  from holding Partner or generate 45.5% return on investment over 90 days.

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

Space Com  vs.  Partner

Space Com

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Space Com are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Space sustained solid returns over the last few months and may actually be approaching a breakup point.

Partner

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Partner are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Partner sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Space and Partner

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

The idea behind Space Com and Partner 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.