Correlation Between Spencers Retail and Par Drugs

Can any of the company-specific risk be diversified away by investing in both Spencers Retail and Par Drugs 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 Par Drugs 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 Par Drugs And, you can compare the effects of market volatilities on Spencers Retail and Par Drugs 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 Par Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spencers Retail and Par Drugs.

Diversification Opportunities for Spencers Retail and Par Drugs

-0.69

Correlation Coefficient

Spencers Retail  Par Drugs

Excellent diversification

The 3 months correlation between Spencers and Par is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail Limited and Par Drugs And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Par Drugs And 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 Par Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Par Drugs And has no effect on the direction of Spencers Retail i.e., Spencers Retail and Par Drugs go up and down completely randomly.

Pair Corralation between Spencers Retail and Par Drugs

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the Par Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Spencers Retail Limited is 1.41 times less risky than Par Drugs. The stock trades about -0.06 of its potential returns per unit of risk. The Par Drugs And is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  24,650  in Par Drugs And on September 3, 2024 and sell it today you would earn a total of  4,390  from holding Par Drugs And or generate 17.81% return on investment over 90 days.

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

Spencers Retail Limited  vs.  Par Drugs And

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 latest conflicting performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Par Drugs And

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Par Drugs And are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Par Drugs exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spencers Retail and Par Drugs

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

The idea behind Spencers Retail Limited and Par Drugs And 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.