Correlation Between SGS SA and Sphere Entertainment

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

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

Diversification Opportunities for SGS SA and Sphere Entertainment

0.62

Correlation Coefficient

SGS SA  Sphere Entertainment

Poor diversification

The 3 months correlation between SGS and Sphere is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment and SGS SA 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 SGS SA are associated (or correlated) with Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of SGS SA i.e., SGS SA and Sphere Entertainment go up and down completely randomly.

Pair Corralation between SGS SA and Sphere Entertainment

Assuming the 90 days horizon SGS SA is expected to generate 4.66 times less return on investment than Sphere Entertainment. But when comparing it to its historical volatility, SGS SA is 2.33 times less risky than Sphere Entertainment. It trades about 0.03 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,148  in Sphere Entertainment Co on September 26, 2024 and sell it today you would earn a total of  1,635  from holding Sphere Entertainment Co or generate 76.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

SGS SA  vs.  Sphere Entertainment Co

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SGS SA and Sphere Entertainment

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

The idea behind SGS SA and Sphere Entertainment Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.