Correlation Between Sierra E and College Retirement

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

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

Diversification Opportunities for Sierra E and College Retirement

0.35

Correlation Coefficient

Sierra E  College Retirement

Weak diversification

The 3 months correlation between Sierra and College is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and College Retirement Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on College Retirement and Sierra E 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 Sierra E Retirement are associated (or correlated) with College Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of College Retirement has no effect on the direction of Sierra E i.e., Sierra E and College Retirement go up and down completely randomly.

Pair Corralation between Sierra E and College Retirement

Assuming the 90 days horizon Sierra E is expected to generate 4.52 times less return on investment than College Retirement. But when comparing it to its historical volatility, Sierra E Retirement is 2.75 times less risky than College Retirement. It trades about 0.07 of its potential returns per unit of risk. College Retirement Equities is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  32,492  in College Retirement Equities on September 14, 2024 and sell it today you would earn a total of  19,602  from holding College Retirement Equities or generate 60.33% return on investment over 90 days.

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

Sierra E Retirement  vs.  College Retirement Equities

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra E Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sierra E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

College Retirement

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in College Retirement Equities are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, College Retirement may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sierra E and College Retirement

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

The idea behind Sierra E Retirement and College Retirement Equities 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..