Correlation Between Value Line and Scout Mid

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

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

Diversification Opportunities for Value Line and Scout Mid

0.07

Correlation Coefficient

Value Line  Scout Mid

Significant diversification

The 3 months correlation between Value and Scout is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Mid and Scout Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scout Mid Cap and Value Line 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 Value Line Mid are associated (or correlated) with Scout Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scout Mid Cap has no effect on the direction of Value Line i.e., Value Line and Scout Mid go up and down completely randomly.

Pair Corralation between Value Line and Scout Mid

Assuming the 90 days horizon Value Line Mid is expected to under-perform the Scout Mid. In addition to that, Value Line is 1.02 times more volatile than Scout Mid Cap. It trades about -0.1 of its total potential returns per unit of risk. Scout Mid Cap is currently generating about 0.08 per unit of volatility. If you would invest  2,587  in Scout Mid Cap on September 24, 2024 and sell it today you would earn a total of  115.00  from holding Scout Mid Cap or generate 4.45% return on investment over 90 days.

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

Value Line Mid  vs.  Scout Mid Cap

Value Line Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Line Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Value Line is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Scout Mid Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Scout Mid Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Scout Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Value Line and Scout Mid

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

The idea behind Value Line Mid and Scout Mid Cap 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.