Correlation Between Scope Metals and Carmit

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

Diversification Opportunities for Scope Metals and Carmit

0.64

Correlation Coefficient

Scope Metals  Carmit

Poor diversification

The 3 months correlation between Scope and Carmit is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Scope Metals Group and Carmit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmit 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 Carmit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmit has no effect on the direction of Scope Metals i.e., Scope Metals and Carmit go up and down completely randomly.

Pair Corralation between Scope Metals and Carmit

Assuming the 90 days trading horizon Scope Metals is expected to generate 1.13 times less return on investment than Carmit. But when comparing it to its historical volatility, Scope Metals Group is 1.62 times less risky than Carmit. It trades about 0.02 of its potential returns per unit of risk. Carmit is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  119,200  in Carmit on September 24, 2024 and sell it today you would lose (2,700) from holding Carmit or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.74%
Values	Daily Returns

Scope Metals Group  vs.  Carmit

Scope Metals Group

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scope Metals Group are ranked lower than 24 (%) 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.

Carmit

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Scope Metals and Carmit

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

The idea behind Scope Metals Group and Carmit 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.