Correlation Between Newtek Business and SCOTT TECHNOLOGY

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

By analyzing existing cross correlation between Newtek Business Services and SCOTT TECHNOLOGY, you can compare the effects of market volatilities on Newtek Business and SCOTT TECHNOLOGY 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 Newtek Business with a short position of SCOTT TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newtek Business and SCOTT TECHNOLOGY.

Diversification Opportunities for Newtek Business and SCOTT TECHNOLOGY

0.13

Correlation Coefficient

Newtek Business  SCOTT TECHNOLOGY

Average diversification

The 3 months correlation between Newtek and SCOTT is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Newtek Business Services and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY and Newtek Business 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 Newtek Business Services are associated (or correlated) with SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of Newtek Business i.e., Newtek Business and SCOTT TECHNOLOGY go up and down completely randomly.

Pair Corralation between Newtek Business and SCOTT TECHNOLOGY

Assuming the 90 days trading horizon Newtek Business is expected to generate 3.55 times less return on investment than SCOTT TECHNOLOGY. But when comparing it to its historical volatility, Newtek Business Services is 1.02 times less risky than SCOTT TECHNOLOGY. It trades about 0.04 of its potential returns per unit of risk. SCOTT TECHNOLOGY is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  99.00  in SCOTT TECHNOLOGY on October 22, 2024 and sell it today you would earn a total of  23.00  from holding SCOTT TECHNOLOGY or generate 23.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Newtek Business Services  vs.  SCOTT TECHNOLOGY

Newtek Business Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newtek Business may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SCOTT TECHNOLOGY

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, SCOTT TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newtek Business and SCOTT TECHNOLOGY

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

The idea behind Newtek Business Services and SCOTT TECHNOLOGY 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.