Correlation Between SCOTT TECHNOLOGY and CHINA WATER

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

By analyzing existing cross correlation between SCOTT TECHNOLOGY and CHINA WATER IGR, you can compare the effects of market volatilities on SCOTT TECHNOLOGY and CHINA WATER 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 SCOTT TECHNOLOGY with a short position of CHINA WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCOTT TECHNOLOGY and CHINA WATER.

Diversification Opportunities for SCOTT TECHNOLOGY and CHINA WATER

-0.67

Correlation Coefficient

SCOTT TECHNOLOGY  CHINA WATER

Excellent diversification

The 3 months correlation between SCOTT and CHINA is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and CHINA WATER IGR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA WATER IGR and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY are associated (or correlated) with CHINA WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA WATER IGR has no effect on the direction of SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and CHINA WATER go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and CHINA WATER

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 0.21 times more return on investment than CHINA WATER. However, SCOTT TECHNOLOGY is 4.79 times less risky than CHINA WATER. It trades about -0.04 of its potential returns per unit of risk. CHINA WATER IGR is currently generating about -0.07 per unit of risk. If you would invest  128.00  in SCOTT TECHNOLOGY on September 25, 2024 and sell it today you would lose (3.00) from holding SCOTT TECHNOLOGY or give up 2.34% of portfolio value over 90 days.

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

SCOTT TECHNOLOGY  vs.  CHINA WATER IGR

SCOTT TECHNOLOGY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, SCOTT TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

CHINA WATER IGR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA WATER IGR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SCOTT TECHNOLOGY and CHINA WATER

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

The idea behind SCOTT TECHNOLOGY and CHINA WATER IGR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .