Correlation Between System and SGA Solutions

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

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

Diversification Opportunities for System and SGA Solutions

0.17

Correlation Coefficient

System  SGA Solutions

Average diversification

The 3 months correlation between System and SGA is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and SGA Solutions CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGA Solutions CoLtd and System 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 System and Application are associated (or correlated) with SGA Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGA Solutions CoLtd has no effect on the direction of System i.e., System and SGA Solutions go up and down completely randomly.

Pair Corralation between System and SGA Solutions

Assuming the 90 days trading horizon System is expected to generate 1.28 times less return on investment than SGA Solutions. In addition to that, System is 1.05 times more volatile than SGA Solutions CoLtd. It trades about 0.14 of its total potential returns per unit of risk. SGA Solutions CoLtd is currently generating about 0.18 per unit of volatility. If you would invest  45,048  in SGA Solutions CoLtd on October 26, 2024 and sell it today you would earn a total of  3,852  from holding SGA Solutions CoLtd or generate 8.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

System and Application  vs.  SGA Solutions CoLtd

System and Application

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 5 (%) 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.

SGA Solutions CoLtd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SGA Solutions CoLtd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SGA Solutions is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with System and SGA Solutions

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

The idea behind System and Application and SGA Solutions CoLtd 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.