Correlation Between Westshore Terminals and Sparta Capital

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

By analyzing existing cross correlation between Westshore Terminals Investment and Sparta Capital, you can compare the effects of market volatilities on Westshore Terminals and Sparta Capital 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 Westshore Terminals with a short position of Sparta Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westshore Terminals and Sparta Capital.

Diversification Opportunities for Westshore Terminals and Sparta Capital

0.02

Correlation Coefficient

Westshore Terminals  Sparta Capital

Significant diversification

The 3 months correlation between Westshore and Sparta is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Westshore Terminals Investment and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Westshore Terminals 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 Westshore Terminals Investment are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Westshore Terminals i.e., Westshore Terminals and Sparta Capital go up and down completely randomly.

Pair Corralation between Westshore Terminals and Sparta Capital

Assuming the 90 days trading horizon Westshore Terminals is expected to generate 14.15 times less return on investment than Sparta Capital. But when comparing it to its historical volatility, Westshore Terminals Investment is 6.68 times less risky than Sparta Capital. It trades about 0.02 of its potential returns per unit of risk. Sparta Capital is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Sparta Capital on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Sparta Capital or generate 0.0% return on investment over 90 days.

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

Westshore Terminals Investment  vs.  Sparta Capital

Westshore Terminals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westshore Terminals Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Westshore Terminals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sparta Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sparta Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westshore Terminals and Sparta Capital

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

The idea behind Westshore Terminals Investment and Sparta Capital 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.