Correlation Between Strategic Investments and Target

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

Diversification Opportunities for Strategic Investments and Target

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Strategic and Target is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Strategic Investments 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 Strategic Investments AS are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Strategic Investments i.e., Strategic Investments and Target go up and down completely randomly.

Pair Corralation between Strategic Investments and Target

Assuming the 90 days trading horizon Strategic Investments AS is expected to generate 0.68 times more return on investment than Target. However, Strategic Investments AS is 1.47 times less risky than Target. It trades about 0.02 of its potential returns per unit of risk. Target is currently generating about -0.01 per unit of risk. If you would invest  109.00  in Strategic Investments AS on December 29, 2023 and sell it today you would earn a total of  8.00  from holding Strategic Investments AS or generate 7.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

Strategic Investments AS  vs.  Target

 Performance 
       Timeline  
Strategic Investments 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Strategic Investments AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Target 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Target unveiled solid returns over the last few months and may actually be approaching a breakup point.

Strategic Investments and Target Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Strategic Investments and Target

The main advantage of trading using opposite Strategic Investments and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Investments position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.
The idea behind Strategic Investments AS and Target 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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