Correlation Between S P and ESILVER

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

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

Diversification Opportunities for S P and ESILVER

0.04

Correlation Coefficient

S P  ESILVER

Significant diversification

The 3 months correlation between SPAL and ESILVER is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding S P Apparels and ESILVER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESILVER and S P 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 S P Apparels are associated (or correlated) with ESILVER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESILVER has no effect on the direction of S P i.e., S P and ESILVER go up and down completely randomly.

Pair Corralation between S P and ESILVER

Assuming the 90 days trading horizon S P is expected to generate 1.24 times less return on investment than ESILVER. In addition to that, S P is 2.3 times more volatile than ESILVER. It trades about 0.07 of its total potential returns per unit of risk. ESILVER is currently generating about 0.19 per unit of volatility. If you would invest  9,890  in ESILVER on April 24, 2025 and sell it today you would earn a total of  1,639  from holding ESILVER or generate 16.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

S P Apparels  vs.  ESILVER

S P Apparels

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in S P Apparels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, S P unveiled solid returns over the last few months and may actually be approaching a breakup point.

ESILVER

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESILVER are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, ESILVER reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with S P and ESILVER

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

The idea behind S P Apparels and ESILVER 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 Transaction History module to view history of all your transactions and understand their impact on performance.