Correlation Between Soulbrain Holdings and SFA Engineering

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

By analyzing existing cross correlation between Soulbrain Holdings Co and SFA Engineering, you can compare the effects of market volatilities on Soulbrain Holdings and SFA Engineering 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 Soulbrain Holdings with a short position of SFA Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soulbrain Holdings and SFA Engineering.

Diversification Opportunities for Soulbrain Holdings and SFA Engineering

0.71

Correlation Coefficient

Soulbrain Holdings  SFA Engineering

Poor diversification

The 3 months correlation between Soulbrain and SFA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Soulbrain Holdings Co and SFA Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFA Engineering and Soulbrain Holdings 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 Soulbrain Holdings Co are associated (or correlated) with SFA Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFA Engineering has no effect on the direction of Soulbrain Holdings i.e., Soulbrain Holdings and SFA Engineering go up and down completely randomly.

Pair Corralation between Soulbrain Holdings and SFA Engineering

Assuming the 90 days trading horizon Soulbrain Holdings Co is expected to under-perform the SFA Engineering. In addition to that, Soulbrain Holdings is 1.11 times more volatile than SFA Engineering. It trades about -0.18 of its total potential returns per unit of risk. SFA Engineering is currently generating about -0.05 per unit of volatility. If you would invest  2,375,000  in SFA Engineering on September 4, 2024 and sell it today you would lose (240,000) from holding SFA Engineering or give up 10.11% of portfolio value over 90 days.

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

Soulbrain Holdings Co  vs.  SFA Engineering

Soulbrain Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soulbrain Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SFA Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFA Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Soulbrain Holdings and SFA Engineering

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

The idea behind Soulbrain Holdings Co and SFA Engineering 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.