Correlation Between COMMONWEALTH and Siriuspoint

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

By analyzing existing cross correlation between COMMONWEALTH EDISON 47 and Siriuspoint, you can compare the effects of market volatilities on COMMONWEALTH and Siriuspoint 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 COMMONWEALTH with a short position of Siriuspoint. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMONWEALTH and Siriuspoint.

Diversification Opportunities for COMMONWEALTH and Siriuspoint

-0.31

Correlation Coefficient

COMMONWEALTH  Siriuspoint

Very good diversification

The 3 months correlation between COMMONWEALTH and Siriuspoint is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding COMMONWEALTH EDISON 47 and Siriuspoint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siriuspoint and COMMONWEALTH 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 COMMONWEALTH EDISON 47 are associated (or correlated) with Siriuspoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siriuspoint has no effect on the direction of COMMONWEALTH i.e., COMMONWEALTH and Siriuspoint go up and down completely randomly.

Pair Corralation between COMMONWEALTH and Siriuspoint

Assuming the 90 days trading horizon COMMONWEALTH EDISON 47 is expected to under-perform the Siriuspoint. But the bond apears to be less risky and, when comparing its historical volatility, COMMONWEALTH EDISON 47 is 1.84 times less risky than Siriuspoint. The bond trades about -0.2 of its potential returns per unit of risk. The Siriuspoint is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,394  in Siriuspoint on September 12, 2024 and sell it today you would earn a total of  182.00  from holding Siriuspoint or generate 13.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.19%
Values	Daily Returns

COMMONWEALTH EDISON 47  vs.  Siriuspoint

COMMONWEALTH EDISON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMONWEALTH EDISON 47 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for COMMONWEALTH EDISON 47 investors.

Siriuspoint

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with COMMONWEALTH and Siriuspoint

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

The idea behind COMMONWEALTH EDISON 47 and Siriuspoint 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.