Correlation Between SCB X and Platinum

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

By analyzing existing cross correlation between SCB X Public and The Platinum Group, you can compare the effects of market volatilities on SCB X and Platinum 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 SCB X with a short position of Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCB X and Platinum.

Diversification Opportunities for SCB X and Platinum

0.15

Correlation Coefficient

SCB X  Platinum

Average diversification

The 3 months correlation between SCB and Platinum is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and The Platinum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Group and SCB X 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 SCB X Public are associated (or correlated) with Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Group has no effect on the direction of SCB X i.e., SCB X and Platinum go up and down completely randomly.

Pair Corralation between SCB X and Platinum

Assuming the 90 days trading horizon SCB X is expected to generate 35.3 times less return on investment than Platinum. But when comparing it to its historical volatility, SCB X Public is 41.18 times less risky than Platinum. It trades about 0.05 of its potential returns per unit of risk. The Platinum Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  384.00  in The Platinum Group on September 27, 2024 and sell it today you would lose (156.00) from holding The Platinum Group or give up 40.63% of portfolio value over 90 days.

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

SCB X Public  vs.  The Platinum Group

SCB X Public

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, SCB X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Platinum Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SCB X and Platinum

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

The idea behind SCB X Public and The Platinum Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.