Correlation Between Sierra Wireless and Elastic NV

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

Diversification Opportunities for Sierra Wireless and Elastic NV

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sierra and Elastic is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Wireless IN and Elastic NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elastic NV and Sierra Wireless 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 Sierra Wireless IN are associated (or correlated) with Elastic NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elastic NV has no effect on the direction of Sierra Wireless i.e., Sierra Wireless and Elastic NV go up and down completely randomly.

Pair Corralation between Sierra Wireless and Elastic NV

Given the investment horizon of 90 days Sierra Wireless IN is expected to generate 0.79 times more return on investment than Elastic NV. However, Sierra Wireless IN is 1.26 times less risky than Elastic NV. It trades about 0.06 of its potential returns per unit of risk. Elastic NV is currently generating about -0.02 per unit of risk. If you would invest  1,432  in Sierra Wireless IN on August 31, 2022 and sell it today you would earn a total of  1,456  from holding Sierra Wireless IN or generate 101.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Sierra Wireless IN  vs.  Elastic NV

 Performance (%) 
       Timeline  
Sierra Wireless IN 
Sierra Performance
0 of 100
Over the last 90 days Sierra Wireless IN has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Sierra Wireless is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Sierra Price Channel

Elastic NV 
Elastic Performance
0 of 100
Over the last 90 days Elastic NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Elastic Price Channel

Sierra Wireless and Elastic NV Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sierra Wireless and Elastic NV

The main advantage of trading using opposite Sierra Wireless and Elastic NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Wireless position performs unexpectedly, Elastic NV 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 Elastic NV will offset losses from the drop in Elastic NV's long position.
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The idea behind Sierra Wireless IN and Elastic NV 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.
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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