Correlation Between DB Insurance and SCI Information

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

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

Diversification Opportunities for DB Insurance and SCI Information

-0.57

Correlation Coefficient

DB Insurance  SCI Information

Excellent diversification

The 3 months correlation between 005830 and SCI is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding DB Insurance Co 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 DB Insurance 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 DB Insurance Co 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 DB Insurance i.e., DB Insurance and SCI Information go up and down completely randomly.

Pair Corralation between DB Insurance and SCI Information

Assuming the 90 days trading horizon DB Insurance Co is expected to under-perform the SCI Information. In addition to that, DB Insurance is 1.43 times more volatile than SCI Information Service. It trades about -0.11 of its total potential returns per unit of risk. SCI Information Service is currently generating about 0.1 per unit of volatility. If you would invest  204,000  in SCI Information Service on December 2, 2024 and sell it today you would earn a total of  20,500  from holding SCI Information Service or generate 10.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

DB Insurance Co  vs.  SCI Information Service

DB Insurance

Risk-Adjusted Performance

Very Weak

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

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 April 2025.

Pair Trading with DB Insurance and SCI Information

The main advantage of trading using opposite DB Insurance and SCI Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DB Insurance 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 DB Insurance Co 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.