Correlation Between Signet Jewelers and SAS AB

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

By analyzing existing cross correlation between Signet Jewelers and SAS AB, you can compare the effects of market volatilities on Signet Jewelers and SAS AB 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 Signet Jewelers with a short position of SAS AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Signet Jewelers and SAS AB.

Diversification Opportunities for Signet Jewelers and SAS AB

-0.41

Correlation Coefficient

Signet Jewelers  SAS AB

Very good diversification

The 3 months correlation between Signet and SAS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Signet Jewelers and SAS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAS AB and Signet Jewelers 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 Signet Jewelers are associated (or correlated) with SAS AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAS AB has no effect on the direction of Signet Jewelers i.e., Signet Jewelers and SAS AB go up and down completely randomly.

Pair Corralation between Signet Jewelers and SAS AB

Considering the 90-day investment horizon Signet Jewelers is expected to generate 0.36 times more return on investment than SAS AB. However, Signet Jewelers is 2.79 times less risky than SAS AB. It trades about 0.04 of its potential returns per unit of risk. SAS AB is currently generating about -0.02 per unit of risk. If you would invest  6,717  in Signet Jewelers on January 26, 2024 and sell it today you would earn a total of  3,142  from holding Signet Jewelers or generate 46.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Signet Jewelers  vs.  SAS AB

Signet Jewelers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signet Jewelers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Signet Jewelers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SAS AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAS AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, SAS AB disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Signet Jewelers and SAS AB

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

The idea behind Signet Jewelers and SAS AB 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.