Correlation Between Snap On and SPACE

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

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

Diversification Opportunities for Snap On and SPACE

0.76

Correlation Coefficient

Snap On  SPACE

Poor diversification

The 3 months correlation between Snap and SPACE is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE and Snap On 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 Snap On are associated (or correlated) with SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of Snap On i.e., Snap On and SPACE go up and down completely randomly.

Pair Corralation between Snap On and SPACE

Considering the 90-day investment horizon Snap On is expected to generate 1.75 times less return on investment than SPACE. But when comparing it to its historical volatility, Snap On is 3.39 times less risky than SPACE. It trades about 0.25 of its potential returns per unit of risk. SPACE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  35.00  in SPACE on September 12, 2024 and sell it today you would earn a total of  15.00  from holding SPACE or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Snap On  vs.  SPACE

Snap On

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On sustained solid returns over the last few months and may actually be approaching a breakup point.

SPACE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Snap On and SPACE

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

The idea behind Snap On and SPACE 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.