Correlation Between Schwager and Salfacorp

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

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

Diversification Opportunities for Schwager and Salfacorp

-0.23

Correlation Coefficient

Schwager  Salfacorp

Very good diversification

The 3 months correlation between Schwager and Salfacorp is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Schwager and Salfacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salfacorp and Schwager 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 Schwager are associated (or correlated) with Salfacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salfacorp has no effect on the direction of Schwager i.e., Schwager and Salfacorp go up and down completely randomly.

Pair Corralation between Schwager and Salfacorp

Assuming the 90 days trading horizon Schwager is expected to generate 30.6 times less return on investment than Salfacorp. But when comparing it to its historical volatility, Schwager is 1.33 times less risky than Salfacorp. It trades about 0.0 of its potential returns per unit of risk. Salfacorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  51,924  in Salfacorp on September 5, 2024 and sell it today you would earn a total of  3,722  from holding Salfacorp or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

Schwager  vs.  Salfacorp

Schwager

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwager has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Schwager is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Salfacorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Salfacorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Schwager and Salfacorp

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

The idea behind Schwager and Salfacorp 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 CEOs Directory module to screen CEOs from public companies around the world.