Correlation Between Target and Spectrum Brands

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

Diversification Opportunities for Target and Spectrum Brands

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Target and Spectrum is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Target and Spectrum Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Brands Holdings and Target 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 Target are associated (or correlated) with Spectrum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Brands Holdings has no effect on the direction of Target i.e., Target and Spectrum Brands go up and down completely randomly.

Pair Corralation between Target and Spectrum Brands

Considering the 90-day investment horizon Target is expected to under-perform the Spectrum Brands. But the stock apears to be less risky and, when comparing its historical volatility, Target is 1.05 times less risky than Spectrum Brands. The stock trades about 0.0 of its potential returns per unit of risk. The Spectrum Brands Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8,344  in Spectrum Brands Holdings on December 30, 2023 and sell it today you would earn a total of  557.00  from holding Spectrum Brands Holdings or generate 6.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Target  vs.  Spectrum Brands Holdings

 Performance 
       Timeline  
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.
Spectrum Brands Holdings 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Brands Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Spectrum Brands may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Target and Spectrum Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Target and Spectrum Brands

The main advantage of trading using opposite Target and Spectrum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target position performs unexpectedly, Spectrum Brands 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 Spectrum Brands will offset losses from the drop in Spectrum Brands' long position.
The idea behind Target and Spectrum Brands Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.

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