Correlation Between Science Applications and Eurotech SpA

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

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

Diversification Opportunities for Science Applications and Eurotech SpA

-0.02

Correlation Coefficient

Science Applications  Eurotech SpA

Good diversification

The 3 months correlation between Science and Eurotech is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and Eurotech SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurotech SpA and Science Applications 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 Science Applications International are associated (or correlated) with Eurotech SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurotech SpA has no effect on the direction of Science Applications i.e., Science Applications and Eurotech SpA go up and down completely randomly.

Pair Corralation between Science Applications and Eurotech SpA

Assuming the 90 days trading horizon Science Applications International is expected to under-perform the Eurotech SpA. But the stock apears to be less risky and, when comparing its historical volatility, Science Applications International is 3.31 times less risky than Eurotech SpA. The stock trades about -0.16 of its potential returns per unit of risk. The Eurotech SpA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Eurotech SpA on December 2, 2024 and sell it today you would earn a total of  12.00  from holding Eurotech SpA or generate 17.14% return on investment over 90 days.

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

Science Applications Internati  vs.  Eurotech SpA

Science Applications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Eurotech SpA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eurotech SpA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eurotech SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Science Applications and Eurotech SpA

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

The idea behind Science Applications International and Eurotech SpA 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.