Correlation Between Spencers Retail and Associated Alcohols

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

By analyzing existing cross correlation between Spencers Retail Limited and Associated Alcohols Breweries, you can compare the effects of market volatilities on Spencers Retail and Associated Alcohols 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 Spencers Retail with a short position of Associated Alcohols. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spencers Retail and Associated Alcohols.

Diversification Opportunities for Spencers Retail and Associated Alcohols

-0.01

Correlation Coefficient

Spencers Retail  Associated Alcohols

Good diversification

The 3 months correlation between Spencers and Associated is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Associated Alcohols Breweries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Alcohols and Spencers Retail 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 Spencers Retail Limited are associated (or correlated) with Associated Alcohols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Alcohols has no effect on the direction of Spencers Retail i.e., Spencers Retail and Associated Alcohols go up and down completely randomly.

Pair Corralation between Spencers Retail and Associated Alcohols

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the Associated Alcohols. But the stock apears to be less risky and, when comparing its historical volatility, Spencers Retail Limited is 1.01 times less risky than Associated Alcohols. The stock trades about -0.13 of its potential returns per unit of risk. The Associated Alcohols Breweries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  98,325  in Associated Alcohols Breweries on September 20, 2024 and sell it today you would earn a total of  13,650  from holding Associated Alcohols Breweries or generate 13.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Spencers Retail Limited  vs.  Associated Alcohols Breweries

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Associated Alcohols

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spencers Retail and Associated Alcohols

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

The idea behind Spencers Retail Limited and Associated Alcohols Breweries 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.