Correlation Between SCI Pharmtech and Globaltek Fabrication

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

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

Diversification Opportunities for SCI Pharmtech and Globaltek Fabrication

-0.45

Correlation Coefficient

SCI Pharmtech  Globaltek Fabrication

Very good diversification

The 3 months correlation between SCI and Globaltek is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding SCI Pharmtech and Globaltek Fabrication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globaltek Fabrication and SCI Pharmtech 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 SCI Pharmtech are associated (or correlated) with Globaltek Fabrication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globaltek Fabrication has no effect on the direction of SCI Pharmtech i.e., SCI Pharmtech and Globaltek Fabrication go up and down completely randomly.

Pair Corralation between SCI Pharmtech and Globaltek Fabrication

Assuming the 90 days trading horizon SCI Pharmtech is expected to generate 0.5 times more return on investment than Globaltek Fabrication. However, SCI Pharmtech is 2.01 times less risky than Globaltek Fabrication. It trades about 0.03 of its potential returns per unit of risk. Globaltek Fabrication Co is currently generating about -0.07 per unit of risk. If you would invest  8,940  in SCI Pharmtech on October 7, 2024 and sell it today you would earn a total of  100.00  from holding SCI Pharmtech or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SCI Pharmtech  vs.  Globaltek Fabrication Co

SCI Pharmtech

Risk-Adjusted Performance

0 of 100

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 fairly stable basic indicators, SCI Pharmtech is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Globaltek Fabrication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globaltek Fabrication Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with SCI Pharmtech and Globaltek Fabrication

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

The idea behind SCI Pharmtech and Globaltek Fabrication Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.