Correlation Between Sparinvest INDEX and Sparinv SICAV

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

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

Diversification Opportunities for Sparinvest INDEX and Sparinv SICAV

0.97

Correlation Coefficient

Sparinvest INDEX  Sparinv SICAV

Almost no diversification

The 3 months correlation between Sparinvest and Sparinv is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Hj and Sparinv SICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinv SICAV and Sparinvest INDEX 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 Sparinvest INDEX Hj are associated (or correlated) with Sparinv SICAV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinv SICAV has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and Sparinv SICAV go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Sparinv SICAV

Assuming the 90 days trading horizon Sparinvest INDEX is expected to generate 1.05 times less return on investment than Sparinv SICAV. But when comparing it to its historical volatility, Sparinvest INDEX Hj is 1.3 times less risky than Sparinv SICAV. It trades about 0.2 of its potential returns per unit of risk. Sparinv SICAV is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  27,220  in Sparinv SICAV on September 14, 2024 and sell it today you would earn a total of  2,140  from holding Sparinv SICAV or generate 7.86% return on investment over 90 days.

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

Sparinvest INDEX Hj  vs.  Sparinv SICAV

Sparinvest INDEX

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Hj are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite quite unsteady technical indicators, Sparinvest INDEX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sparinv SICAV

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinv SICAV are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, Sparinv SICAV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sparinvest INDEX and Sparinv SICAV

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

The idea behind Sparinvest INDEX Hj and Sparinv SICAV 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.