Correlation Between SCI Engineered and Scientific Industries

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

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

Diversification Opportunities for SCI Engineered and Scientific Industries

0.69

Correlation Coefficient

SCI Engineered  Scientific Industries

Poor diversification

The 3 months correlation between SCI and Scientific is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SCI Engineered Materials and Scientific Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Industries and SCI Engineered 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 SCI Engineered Materials are associated (or correlated) with Scientific Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Industries has no effect on the direction of SCI Engineered i.e., SCI Engineered and Scientific Industries go up and down completely randomly.

Pair Corralation between SCI Engineered and Scientific Industries

Given the investment horizon of 90 days SCI Engineered is expected to generate 51.17 times less return on investment than Scientific Industries. But when comparing it to its historical volatility, SCI Engineered Materials is 2.81 times less risky than Scientific Industries. It trades about 0.0 of its potential returns per unit of risk. Scientific Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Scientific Industries on September 2, 2024 and sell it today you would earn a total of  7.00  from holding Scientific Industries or generate 5.88% return on investment over 90 days.

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

SCI Engineered Materials  vs.  Scientific Industries

SCI Engineered Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCI Engineered Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SCI Engineered is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Scientific Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scientific Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Scientific Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCI Engineered and Scientific Industries

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

The idea behind SCI Engineered Materials and Scientific Industries 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.