Correlation Between Globaltek Fabrication and SCI Pharmtech

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

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

Diversification Opportunities for Globaltek Fabrication and SCI Pharmtech

0.3

Correlation Coefficient

Globaltek Fabrication  SCI Pharmtech

Weak diversification

The 3 months correlation between Globaltek and SCI is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Globaltek Fabrication Co and SCI Pharmtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Pharmtech and Globaltek Fabrication 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 Globaltek Fabrication Co 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 Globaltek Fabrication i.e., Globaltek Fabrication and SCI Pharmtech go up and down completely randomly.

Pair Corralation between Globaltek Fabrication and SCI Pharmtech

Assuming the 90 days trading horizon Globaltek Fabrication Co is expected to generate 3.24 times more return on investment than SCI Pharmtech. However, Globaltek Fabrication is 3.24 times more volatile than SCI Pharmtech. It trades about 0.02 of its potential returns per unit of risk. SCI Pharmtech is currently generating about -0.17 per unit of risk. If you would invest  7,610  in Globaltek Fabrication Co on December 23, 2024 and sell it today you would earn a total of  50.00  from holding Globaltek Fabrication Co or generate 0.66% return on investment over 90 days.

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

Globaltek Fabrication Co  vs.  SCI Pharmtech

Globaltek Fabrication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Globaltek Fabrication Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Globaltek Fabrication 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 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 Globaltek Fabrication and SCI Pharmtech

The main advantage of trading using opposite Globaltek Fabrication and SCI Pharmtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globaltek Fabrication 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 Globaltek Fabrication Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.