Correlation Between Spectrum Brands and Rite Aid

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Can any of the company-specific risk be diversified away by investing in both Spectrum Brands and Rite Aid 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 Spectrum Brands and Rite Aid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spectrum Brands Holdings and Rite Aid, you can compare the effects of market volatilities on Spectrum Brands and Rite Aid 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 Spectrum Brands with a short position of Rite Aid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spectrum Brands and Rite Aid.

Diversification Opportunities for Spectrum Brands and Rite Aid

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Spectrum and Rite is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Rite Aid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rite Aid and Spectrum Brands 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 Spectrum Brands Holdings are associated (or correlated) with Rite Aid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rite Aid has no effect on the direction of Spectrum Brands i.e., Spectrum Brands and Rite Aid go up and down completely randomly.

Pair Corralation between Spectrum Brands and Rite Aid

If you would invest  8,048  in Spectrum Brands Holdings on December 29, 2023 and sell it today you would earn a total of  853.00  from holding Spectrum Brands Holdings or generate 10.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy4.35%
ValuesDaily Returns

Spectrum Brands Holdings  vs.  Rite Aid

 Performance 
       Timeline  
Spectrum Brands Holdings 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Brands Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Spectrum Brands may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Rite Aid 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Rite Aid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rite Aid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Spectrum Brands and Rite Aid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Spectrum Brands and Rite Aid

The main advantage of trading using opposite Spectrum Brands and Rite Aid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectrum Brands position performs unexpectedly, Rite Aid 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 Rite Aid will offset losses from the drop in Rite Aid's long position.
The idea behind Spectrum Brands Holdings and Rite Aid 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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