Correlation Between Grape King and SCI Pharmtech

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

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

Diversification Opportunities for Grape King and SCI Pharmtech

0.86

Correlation Coefficient

Grape King  SCI Pharmtech

Very poor diversification

The 3 months correlation between Grape and SCI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Grape King Bio and SCI Pharmtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Pharmtech and Grape King 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 Grape King Bio are associated (or correlated) with SCI Pharmtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Pharmtech has no effect on the direction of Grape King i.e., Grape King and SCI Pharmtech go up and down completely randomly.

Pair Corralation between Grape King and SCI Pharmtech

Assuming the 90 days trading horizon Grape King Bio is expected to generate 0.91 times more return on investment than SCI Pharmtech. However, Grape King Bio is 1.1 times less risky than SCI Pharmtech. It trades about -0.02 of its potential returns per unit of risk. SCI Pharmtech is currently generating about -0.04 per unit of risk. If you would invest  17,600  in Grape King Bio on December 4, 2024 and sell it today you would lose (2,700) from holding Grape King Bio or give up 15.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Grape King Bio  vs.  SCI Pharmtech

Grape King Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grape King Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grape King is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SCI Pharmtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCI Pharmtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Grape King and SCI Pharmtech

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

The idea behind Grape King Bio and SCI Pharmtech 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.