Correlation Between Roku and Sparinvest INDEX

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

By analyzing existing cross correlation between Roku Inc and Sparinvest INDEX Global, you can compare the effects of market volatilities on Roku and Sparinvest INDEX 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 Roku with a short position of Sparinvest INDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roku and Sparinvest INDEX.

Diversification Opportunities for Roku and Sparinvest INDEX

-0.76

Correlation Coefficient

Roku  Sparinvest INDEX

Pay attention - limited upside

The 3 months correlation between Roku and Sparinvest is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Roku Inc and Sparinvest INDEX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest INDEX Global and Roku 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 Roku Inc are associated (or correlated) with Sparinvest INDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest INDEX Global has no effect on the direction of Roku i.e., Roku and Sparinvest INDEX go up and down completely randomly.

Pair Corralation between Roku and Sparinvest INDEX

Given the investment horizon of 90 days Roku Inc is expected to under-perform the Sparinvest INDEX. In addition to that, Roku is 3.95 times more volatile than Sparinvest INDEX Global. It trades about -0.23 of its total potential returns per unit of risk. Sparinvest INDEX Global is currently generating about -0.05 per unit of volatility. If you would invest  13,865  in Sparinvest INDEX Global on January 24, 2024 and sell it today you would lose (65.00) from holding Sparinvest INDEX Global or give up 0.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

Roku Inc  vs.  Sparinvest INDEX Global

Roku Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roku Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sparinvest INDEX Global

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Global are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy technical and fundamental indicators, Sparinvest INDEX is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Roku and Sparinvest INDEX

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

The idea behind Roku Inc and Sparinvest INDEX Global 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.