Correlation Between SFA Engineering and Partron Co

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

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

Diversification Opportunities for SFA Engineering and Partron Co

0.65

Correlation Coefficient

SFA Engineering  Partron Co

Poor diversification

The 3 months correlation between SFA and Partron is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SFA Engineering and Partron Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partron 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 Partron Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partron Co has no effect on the direction of SFA Engineering i.e., SFA Engineering and Partron Co go up and down completely randomly.

Pair Corralation between SFA Engineering and Partron Co

Assuming the 90 days trading horizon SFA Engineering is expected to generate 2.92 times more return on investment than Partron Co. However, SFA Engineering is 2.92 times more volatile than Partron Co. It trades about -0.01 of its potential returns per unit of risk. Partron Co is currently generating about -0.04 per unit of risk. If you would invest  2,015,000  in SFA Engineering on September 12, 2024 and sell it today you would lose (42,000) from holding SFA Engineering or give up 2.08% of portfolio value over 90 days.

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

SFA Engineering  vs.  Partron Co

SFA Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFA Engineering 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.

Partron Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Partron Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Partron Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SFA Engineering and Partron Co

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

The idea behind SFA Engineering and Partron 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.