Correlation Between SC Asset and SCI Electric

Can any of the company-specific risk be diversified away by investing in both SC Asset and SCI Electric 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 SC Asset and SCI Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SC Asset and SCI Electric Public, you can compare the effects of market volatilities on SC Asset and SCI Electric 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 SC Asset with a short position of SCI Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of SC Asset and SCI Electric.

Diversification Opportunities for SC Asset and SCI Electric

0.56

Correlation Coefficient

SC Asset  SCI Electric

Very weak diversification

The 3 months correlation between SC Asset and SCI is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SC Asset and SCI Electric Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Electric Public and SC Asset 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 SC Asset are associated (or correlated) with SCI Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Electric Public has no effect on the direction of SC Asset i.e., SC Asset and SCI Electric go up and down completely randomly.

Pair Corralation between SC Asset and SCI Electric

Assuming the 90 days horizon SC Asset is expected to generate 0.81 times more return on investment than SCI Electric. However, SC Asset is 1.23 times less risky than SCI Electric. It trades about -0.01 of its potential returns per unit of risk. SCI Electric Public is currently generating about -0.02 per unit of risk. If you would invest  288.00  in SC Asset on September 16, 2024 and sell it today you would lose (6.00) from holding SC Asset or give up 2.08% of portfolio value over 90 days.

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

SC Asset  vs.  SCI Electric Public

SC Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SC Asset has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, SC Asset is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SCI Electric Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCI Electric Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, SCI Electric is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SC Asset and SCI Electric

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

The idea behind SC Asset and SCI Electric Public 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.