Correlation Between Innowireless and SCI Information

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

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

Diversification Opportunities for Innowireless and SCI Information

0.02

Correlation Coefficient

Innowireless  SCI Information

Significant diversification

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

Pair Corralation between Innowireless and SCI Information

Assuming the 90 days trading horizon Innowireless Co is expected to under-perform the SCI Information. But the stock apears to be less risky and, when comparing its historical volatility, Innowireless Co is 1.19 times less risky than SCI Information. The stock trades about -0.03 of its potential returns per unit of risk. The SCI Information Service is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  364,368  in SCI Information Service on October 15, 2024 and sell it today you would lose (128,368) from holding SCI Information Service or give up 35.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.02%
Values	Daily Returns

Innowireless Co  vs.  SCI Information Service

Innowireless

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innowireless Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innowireless sustained solid returns over the last few months and may actually be approaching a breakup point.

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 somewhat strong basic indicators, SCI Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Innowireless and SCI Information

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

The idea behind Innowireless Co and SCI Information Service 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.