Correlation Between SCB X and Prima Marine

Can any of the company-specific risk be diversified away by investing in both SCB X and Prima Marine 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 Prima Marine 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 Prima Marine Public, you can compare the effects of market volatilities on SCB X and Prima Marine 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 Prima Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCB X and Prima Marine.

Diversification Opportunities for SCB X and Prima Marine

0.54

Correlation Coefficient

SCB X  Prima Marine

Very weak diversification

The 3 months correlation between SCB and Prima is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and Prima Marine Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prima Marine Public 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 Prima Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prima Marine Public has no effect on the direction of SCB X i.e., SCB X and Prima Marine go up and down completely randomly.

Pair Corralation between SCB X and Prima Marine

Assuming the 90 days trading horizon SCB X Public is expected to generate 0.59 times more return on investment than Prima Marine. However, SCB X Public is 1.69 times less risky than Prima Marine. It trades about 0.13 of its potential returns per unit of risk. Prima Marine Public is currently generating about 0.03 per unit of risk. If you would invest  10,900  in SCB X Public on September 29, 2024 and sell it today you would earn a total of  800.00  from holding SCB X Public or generate 7.34% return on investment over 90 days.

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

SCB X Public  vs.  Prima Marine Public

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.

Prima Marine Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prima Marine Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, Prima Marine 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 SCB X and Prima Marine

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

The idea behind SCB X Public and Prima Marine 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.