Correlation Between SCI Information and SillaJen

Can any of the company-specific risk be diversified away by investing in both SCI Information and SillaJen 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 SillaJen 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 SillaJen, you can compare the effects of market volatilities on SCI Information and SillaJen 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 SillaJen. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCI Information and SillaJen.

Diversification Opportunities for SCI Information and SillaJen

0.02

Correlation Coefficient

SCI Information  SillaJen

Significant diversification

The 3 months correlation between SCI and SillaJen is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SCI Information Service and SillaJen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SillaJen 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 SillaJen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SillaJen has no effect on the direction of SCI Information i.e., SCI Information and SillaJen go up and down completely randomly.

Pair Corralation between SCI Information and SillaJen

Assuming the 90 days trading horizon SCI Information Service is expected to under-perform the SillaJen. But the stock apears to be less risky and, when comparing its historical volatility, SCI Information Service is 1.57 times less risky than SillaJen. The stock trades about -0.16 of its potential returns per unit of risk. The SillaJen is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  272,000  in SillaJen on September 12, 2024 and sell it today you would earn a total of  6,000  from holding SillaJen or generate 2.21% return on investment over 90 days.

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

SCI Information Service  vs.  SillaJen

SCI Information Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCI Information Service 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SillaJen

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SillaJen are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SillaJen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SCI Information and SillaJen

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

The idea behind SCI Information Service and SillaJen 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.