Correlation Between SGA Solutions and DeviceENGCOLtd

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

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

Diversification Opportunities for SGA Solutions and DeviceENGCOLtd

0.72

Correlation Coefficient

SGA Solutions  DeviceENGCOLtd

Poor diversification

The 3 months correlation between SGA and DeviceENGCOLtd is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SGA Solutions CoLtd and DeviceENGCOLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeviceENGCOLtd and SGA Solutions 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 SGA Solutions CoLtd are associated (or correlated) with DeviceENGCOLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeviceENGCOLtd has no effect on the direction of SGA Solutions i.e., SGA Solutions and DeviceENGCOLtd go up and down completely randomly.

Pair Corralation between SGA Solutions and DeviceENGCOLtd

Assuming the 90 days trading horizon SGA Solutions CoLtd is expected to generate 0.99 times more return on investment than DeviceENGCOLtd. However, SGA Solutions CoLtd is 1.01 times less risky than DeviceENGCOLtd. It trades about -0.04 of its potential returns per unit of risk. DeviceENGCOLtd is currently generating about -0.16 per unit of risk. If you would invest  48,571  in SGA Solutions CoLtd on September 29, 2024 and sell it today you would lose (3,171) from holding SGA Solutions CoLtd or give up 6.53% of portfolio value over 90 days.

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

SGA Solutions CoLtd  vs.  DeviceENGCOLtd

SGA Solutions CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGA Solutions CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

DeviceENGCOLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DeviceENGCOLtd 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.

Pair Trading with SGA Solutions and DeviceENGCOLtd

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

The idea behind SGA Solutions CoLtd and DeviceENGCOLtd 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.