Correlation Between Sao Ta and SCG Construction

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

By analyzing existing cross correlation between Sao Ta Foods and SCG Construction JSC, you can compare the effects of market volatilities on Sao Ta and SCG Construction 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 Sao Ta with a short position of SCG Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Ta and SCG Construction.

Diversification Opportunities for Sao Ta and SCG Construction

0.33

Correlation Coefficient

Sao Ta  SCG Construction

Weak diversification

The 3 months correlation between Sao and SCG is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods and SCG Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCG Construction JSC and Sao Ta 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 Sao Ta Foods are associated (or correlated) with SCG Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCG Construction JSC has no effect on the direction of Sao Ta i.e., Sao Ta and SCG Construction go up and down completely randomly.

Pair Corralation between Sao Ta and SCG Construction

Assuming the 90 days trading horizon Sao Ta Foods is expected to generate 2.56 times more return on investment than SCG Construction. However, Sao Ta is 2.56 times more volatile than SCG Construction JSC. It trades about 0.02 of its potential returns per unit of risk. SCG Construction JSC is currently generating about 0.02 per unit of risk. If you would invest  4,436,038  in Sao Ta Foods on September 23, 2024 and sell it today you would earn a total of  253,962  from holding Sao Ta Foods or generate 5.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

Sao Ta Foods  vs.  SCG Construction JSC

Sao Ta Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sao Ta Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SCG Construction JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCG Construction JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, SCG Construction is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sao Ta and SCG Construction

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

The idea behind Sao Ta Foods and SCG Construction JSC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.