Correlation Between ABCO Electronics and SNTEnergy

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

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

Diversification Opportunities for ABCO Electronics and SNTEnergy

0.22

Correlation Coefficient

ABCO Electronics  SNTEnergy

Modest diversification

The 3 months correlation between ABCO and SNTEnergy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and SNTEnergy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNTEnergy and ABCO Electronics 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 ABCO Electronics Co are associated (or correlated) with SNTEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNTEnergy has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and SNTEnergy go up and down completely randomly.

Pair Corralation between ABCO Electronics and SNTEnergy

Assuming the 90 days trading horizon ABCO Electronics Co is expected to under-perform the SNTEnergy. But the stock apears to be less risky and, when comparing its historical volatility, ABCO Electronics Co is 1.38 times less risky than SNTEnergy. The stock trades about -0.08 of its potential returns per unit of risk. The SNTEnergy Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  781,123  in SNTEnergy Co on October 23, 2024 and sell it today you would earn a total of  1,718,877  from holding SNTEnergy Co or generate 220.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.74%
Values	Daily Returns

ABCO Electronics Co  vs.  SNTEnergy Co

ABCO Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ABCO Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABCO Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SNTEnergy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SNTEnergy Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SNTEnergy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABCO Electronics and SNTEnergy

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

The idea behind ABCO Electronics Co and SNTEnergy Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.