Correlation Between Solartron Public and SCI Electric

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

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

Diversification Opportunities for Solartron Public and SCI Electric

0.77

Correlation Coefficient

Solartron Public  SCI Electric

Poor diversification

The 3 months correlation between Solartron and SCI is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Solartron Public and SCI Electric Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Electric Public and Solartron Public 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 Solartron Public are associated (or correlated) with SCI Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Electric Public has no effect on the direction of Solartron Public i.e., Solartron Public and SCI Electric go up and down completely randomly.

Pair Corralation between Solartron Public and SCI Electric

Assuming the 90 days trading horizon Solartron Public is expected to under-perform the SCI Electric. In addition to that, Solartron Public is 1.37 times more volatile than SCI Electric Public. It trades about -0.08 of its total potential returns per unit of risk. SCI Electric Public is currently generating about -0.02 per unit of volatility. If you would invest  92.00  in SCI Electric Public on September 16, 2024 and sell it today you would lose (3.00) from holding SCI Electric Public or give up 3.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Solartron Public  vs.  SCI Electric Public

Solartron Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solartron Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SCI Electric Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCI Electric Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, SCI Electric is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Solartron Public and SCI Electric

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

The idea behind Solartron Public and SCI Electric Public 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.