Correlation Between Sky Century and Target

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

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

Diversification Opportunities for Sky Century and Target

0.24

Correlation Coefficient

Sky Century  Target

Modest diversification

The 3 months correlation between Sky and Target is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sky Century Investment and Target Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Group and Sky Century 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 Sky Century Investment are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Group has no effect on the direction of Sky Century i.e., Sky Century and Target go up and down completely randomly.

Pair Corralation between Sky Century and Target

Given the investment horizon of 90 days Sky Century Investment is expected to generate 1.04 times more return on investment than Target. However, Sky Century is 1.04 times more volatile than Target Group. It trades about 0.09 of its potential returns per unit of risk. Target Group is currently generating about 0.09 per unit of risk. If you would invest  0.54  in Sky Century Investment on September 14, 2024 and sell it today you would lose (0.29) from holding Sky Century Investment or give up 53.7% of portfolio value over 90 days.

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

Sky Century Investment  vs.  Target Group

Sky Century Investment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Century Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Sky Century demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Target Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Target showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sky Century and Target

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

The idea behind Sky Century Investment and Target Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.