Correlation Between SCRT and Highstreet

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

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

Diversification Opportunities for SCRT and Highstreet

0.89

Correlation Coefficient

SCRT  Highstreet

Very poor diversification

The 3 months correlation between SCRT and Highstreet is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SCRT and Highstreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highstreet and SCRT 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 SCRT are associated (or correlated) with Highstreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highstreet has no effect on the direction of SCRT i.e., SCRT and Highstreet go up and down completely randomly.

Pair Corralation between SCRT and Highstreet

Assuming the 90 days trading horizon SCRT is expected to generate 1.98 times more return on investment than Highstreet. However, SCRT is 1.98 times more volatile than Highstreet. It trades about 0.19 of its potential returns per unit of risk. Highstreet is currently generating about 0.12 per unit of risk. If you would invest  19.00  in SCRT on September 12, 2024 and sell it today you would earn a total of  34.00  from holding SCRT or generate 178.95% return on investment over 90 days.

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

SCRT  vs.  Highstreet

SCRT

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCRT are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SCRT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Highstreet

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Highstreet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Highstreet exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCRT and Highstreet

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

The idea behind SCRT and Highstreet 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.