Correlation Between Spin Master and Roots Corp

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

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

Diversification Opportunities for Spin Master and Roots Corp

-0.39

Correlation Coefficient

Spin Master  Roots Corp

Very good diversification

The 3 months correlation between Spin and Roots is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Spin Master Corp and Roots Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roots Corp and Spin Master 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 Spin Master Corp are associated (or correlated) with Roots Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roots Corp has no effect on the direction of Spin Master i.e., Spin Master and Roots Corp go up and down completely randomly.

Pair Corralation between Spin Master and Roots Corp

Assuming the 90 days trading horizon Spin Master Corp is expected to generate 0.78 times more return on investment than Roots Corp. However, Spin Master Corp is 1.28 times less risky than Roots Corp. It trades about 0.01 of its potential returns per unit of risk. Roots Corp is currently generating about -0.01 per unit of risk. If you would invest  3,288  in Spin Master Corp on September 12, 2024 and sell it today you would earn a total of  103.00  from holding Spin Master Corp or generate 3.13% return on investment over 90 days.

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

Spin Master Corp  vs.  Roots Corp

Spin Master Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spin Master Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Spin Master displayed solid returns over the last few months and may actually be approaching a breakup point.

Roots Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roots Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Roots Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Spin Master and Roots Corp

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

The idea behind Spin Master Corp and Roots Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.