Correlation Between Skyline Investment and Tower Investments

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

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

Diversification Opportunities for Skyline Investment and Tower Investments

0.37

Correlation Coefficient

Skyline Investment  Tower Investments

Weak diversification

The 3 months correlation between Skyline and Tower is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Skyline Investment SA and Tower Investments SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Investments and Skyline Investment 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 Skyline Investment SA are associated (or correlated) with Tower Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Investments has no effect on the direction of Skyline Investment i.e., Skyline Investment and Tower Investments go up and down completely randomly.

Pair Corralation between Skyline Investment and Tower Investments

Assuming the 90 days trading horizon Skyline Investment SA is expected to generate 0.74 times more return on investment than Tower Investments. However, Skyline Investment SA is 1.35 times less risky than Tower Investments. It trades about 0.01 of its potential returns per unit of risk. Tower Investments SA is currently generating about -0.03 per unit of risk. If you would invest  158.00  in Skyline Investment SA on September 12, 2024 and sell it today you would lose (2.00) from holding Skyline Investment SA or give up 1.27% of portfolio value over 90 days.

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

Skyline Investment SA  vs.  Tower Investments SA

Skyline Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyline Investment SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Skyline Investment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Tower Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tower Investments SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tower Investments is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Skyline Investment and Tower Investments

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

The idea behind Skyline Investment SA and Tower Investments SA 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.