Correlation Between SFA Engineering and BH

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

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

Diversification Opportunities for SFA Engineering and BH

-0.12

Correlation Coefficient

SFA Engineering  BH

Good diversification

The 3 months correlation between SFA and BH is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding SFA Engineering and BH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Co and SFA Engineering 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 SFA Engineering are associated (or correlated) with BH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Co has no effect on the direction of SFA Engineering i.e., SFA Engineering and BH go up and down completely randomly.

Pair Corralation between SFA Engineering and BH

Assuming the 90 days trading horizon SFA Engineering is expected to generate 0.79 times more return on investment than BH. However, SFA Engineering is 1.27 times less risky than BH. It trades about 0.05 of its potential returns per unit of risk. BH Co is currently generating about -0.12 per unit of risk. If you would invest  1,984,000  in SFA Engineering on December 27, 2024 and sell it today you would earn a total of  76,000  from holding SFA Engineering or generate 3.83% return on investment over 90 days.

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

SFA Engineering  vs.  BH Co

SFA Engineering

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SFA Engineering are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SFA Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BH Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days BH 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.

Pair Trading with SFA Engineering and BH

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

The idea behind SFA Engineering and BH 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.