Correlation Between Sam Yang and SCI Information

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

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

Diversification Opportunities for Sam Yang and SCI Information

0.72

Correlation Coefficient

Sam Yang  SCI Information

Poor diversification

The 3 months correlation between Sam and SCI is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sam Yang Foods and SCI Information Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Information Service and Sam Yang 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 Sam Yang Foods are associated (or correlated) with SCI Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Information Service has no effect on the direction of Sam Yang i.e., Sam Yang and SCI Information go up and down completely randomly.

Pair Corralation between Sam Yang and SCI Information

Assuming the 90 days trading horizon Sam Yang Foods is expected to generate 2.05 times more return on investment than SCI Information. However, Sam Yang is 2.05 times more volatile than SCI Information Service. It trades about 0.27 of its potential returns per unit of risk. SCI Information Service is currently generating about 0.11 per unit of risk. If you would invest  51,900,000  in Sam Yang Foods on November 29, 2024 and sell it today you would earn a total of  35,700,000  from holding Sam Yang Foods or generate 68.79% return on investment over 90 days.

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

Sam Yang Foods  vs.  SCI Information Service

Sam Yang Foods

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sam Yang Foods are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sam Yang sustained solid returns over the last few months and may actually be approaching a breakup point.

SCI Information Service

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCI Information Service are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SCI Information may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Sam Yang and SCI Information

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

The idea behind Sam Yang Foods and SCI Information Service 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.