Correlation Between Scope Metals and Brand

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

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

Diversification Opportunities for Scope Metals and Brand

0.84

Correlation Coefficient

Scope Metals  Brand

Very poor diversification

The 3 months correlation between Scope and Brand is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Scope Metals Group and Brand Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brand Group and Scope Metals 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 Scope Metals Group are associated (or correlated) with Brand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brand Group has no effect on the direction of Scope Metals i.e., Scope Metals and Brand go up and down completely randomly.

Pair Corralation between Scope Metals and Brand

Assuming the 90 days trading horizon Scope Metals Group is expected to generate 1.09 times more return on investment than Brand. However, Scope Metals is 1.09 times more volatile than Brand Group. It trades about 0.28 of its potential returns per unit of risk. Brand Group is currently generating about 0.25 per unit of risk. If you would invest  1,074,000  in Scope Metals Group on September 29, 2024 and sell it today you would earn a total of  357,000  from holding Scope Metals Group or generate 33.24% return on investment over 90 days.

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

Scope Metals Group  vs.  Brand Group

Scope Metals Group

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scope Metals Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Scope Metals sustained solid returns over the last few months and may actually be approaching a breakup point.

Brand Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brand Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brand sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scope Metals and Brand

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

The idea behind Scope Metals Group and Brand 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.