Correlation Between SPARTAN STORES and China BlueChemical

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

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

Diversification Opportunities for SPARTAN STORES and China BlueChemical

-0.12

Correlation Coefficient

SPARTAN STORES  China BlueChemical

Good diversification

The 3 months correlation between SPARTAN and China is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical and SPARTAN STORES 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 SPARTAN STORES are associated (or correlated) with China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of SPARTAN STORES i.e., SPARTAN STORES and China BlueChemical go up and down completely randomly.

Pair Corralation between SPARTAN STORES and China BlueChemical

Assuming the 90 days trading horizon SPARTAN STORES is expected to under-perform the China BlueChemical. But the stock apears to be less risky and, when comparing its historical volatility, SPARTAN STORES is 1.6 times less risky than China BlueChemical. The stock trades about 0.0 of its potential returns per unit of risk. The China BlueChemical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  20.00  in China BlueChemical on September 17, 2024 and sell it today you would earn a total of  5.00  from holding China BlueChemical or generate 25.0% return on investment over 90 days.

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

SPARTAN STORES  vs.  China BlueChemical

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, SPARTAN STORES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

China BlueChemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, China BlueChemical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPARTAN STORES and China BlueChemical

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

The idea behind SPARTAN STORES and China BlueChemical 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.