Can any of the company-specific risk be diversified away by investing in both Wingstop 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 Wingstop and Siriuspoint into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wingstop and Siriuspoint, you can compare the effects of market volatilities on Wingstop 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 Wingstop with a short position of Siriuspoint. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and Siriuspoint.
Diversification Opportunities for Wingstop and Siriuspoint
The 3 months correlation between Wingstop and Siriuspoint is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Siriuspoint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siriuspoint and Wingstop 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 Wingstop 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 Wingstop i.e., Wingstop and Siriuspoint go up and down completely randomly.
Given the investment horizon of 90 days Wingstop is expected to under-perform the Siriuspoint. In addition to that, Wingstop is 1.21 times more volatile than Siriuspoint. It trades about -0.14 of its total potential returns per unit of risk. Siriuspoint is currently generating about 0.21 per unit of volatility. If you would invest 1,225 in Siriuspoint on March 6, 2024 and sell it today you would earn a total of 69.00 from holding Siriuspoint or generate 5.63% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Wingstop are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wingstop is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Siriuspoint are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Siriuspoint is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.