Correlation Between Sentinel Small and Total Return

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

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

Diversification Opportunities for Sentinel Small and Total Return

0.85

Correlation Coefficient

Sentinel Small  Total Return

Very poor diversification

The 3 months correlation between Sentinel and Total is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Small Pany and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond and Sentinel Small 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 Sentinel Small Pany are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of Sentinel Small i.e., Sentinel Small and Total Return go up and down completely randomly.

Pair Corralation between Sentinel Small and Total Return

Assuming the 90 days horizon Sentinel Small Pany is expected to generate 10.01 times more return on investment than Total Return. However, Sentinel Small is 10.01 times more volatile than Total Return Bond. It trades about 0.16 of its potential returns per unit of risk. Total Return Bond is currently generating about 0.2 per unit of risk. If you would invest  699.00  in Sentinel Small Pany on September 12, 2024 and sell it today you would earn a total of  72.00  from holding Sentinel Small Pany or generate 10.3% return on investment over 90 days.

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

Sentinel Small Pany  vs.  Total Return Bond

Sentinel Small Pany

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sentinel Small Pany are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sentinel Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Total Return Bond

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Return Bond are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Total Return is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sentinel Small and Total Return

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

The idea behind Sentinel Small Pany and Total Return Bond 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.