Correlation Between SCI Information and System

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

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

Diversification Opportunities for SCI Information and System

0.74

Correlation Coefficient

SCI Information  System

Poor diversification

The 3 months correlation between SCI and System is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SCI Information Service and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application and SCI Information 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 SCI Information Service are associated (or correlated) with System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of SCI Information i.e., SCI Information and System go up and down completely randomly.

Pair Corralation between SCI Information and System

Assuming the 90 days trading horizon SCI Information is expected to generate 1.7 times less return on investment than System. But when comparing it to its historical volatility, SCI Information Service is 2.23 times less risky than System. It trades about 0.1 of its potential returns per unit of risk. System and Application is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  134,443  in System and Application on December 2, 2024 and sell it today you would earn a total of  19,557  from holding System and Application or generate 14.55% return on investment over 90 days.

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

SCI Information Service  vs.  System and Application

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.

System and Application

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, System sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCI Information and System

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

The idea behind SCI Information Service and System and Application 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.