Correlation Between SCG Construction and Sao Ta

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

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

Diversification Opportunities for SCG Construction and Sao Ta

0.33

Correlation Coefficient

SCG Construction  Sao Ta

Weak diversification

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

Pair Corralation between SCG Construction and Sao Ta

Assuming the 90 days trading horizon SCG Construction is expected to generate 3.69 times less return on investment than Sao Ta. But when comparing it to its historical volatility, SCG Construction JSC is 2.56 times less risky than Sao Ta. It trades about 0.02 of its potential returns per unit of risk. Sao Ta Foods is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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

SCG Construction JSC  vs.  Sao Ta Foods

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.

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.

Pair Trading with SCG Construction and Sao Ta

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

The idea behind SCG Construction JSC and Sao Ta Foods 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.