Correlation Between Scientech Corp and Innolux Corp

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

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

Diversification Opportunities for Scientech Corp and Innolux Corp

0.64

Correlation Coefficient

Scientech Corp  Innolux Corp

Poor diversification

The 3 months correlation between Scientech and Innolux is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Scientech Corp and Innolux Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innolux Corp and Scientech Corp 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 Scientech Corp are associated (or correlated) with Innolux Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innolux Corp has no effect on the direction of Scientech Corp i.e., Scientech Corp and Innolux Corp go up and down completely randomly.

Pair Corralation between Scientech Corp and Innolux Corp

Assuming the 90 days trading horizon Scientech Corp is expected to generate 1.61 times more return on investment than Innolux Corp. However, Scientech Corp is 1.61 times more volatile than Innolux Corp. It trades about 0.06 of its potential returns per unit of risk. Innolux Corp is currently generating about 0.02 per unit of risk. If you would invest  38,800  in Scientech Corp on September 14, 2024 and sell it today you would earn a total of  3,000  from holding Scientech Corp or generate 7.73% return on investment over 90 days.

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

Scientech Corp  vs.  Innolux Corp

Scientech Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scientech Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Scientech Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Innolux Corp

Risk-Adjusted Performance

1 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innolux Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Innolux Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Scientech Corp and Innolux Corp

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

The idea behind Scientech Corp and Innolux Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.