Correlation Between Asm Pacific and SCI Engineered

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

By analyzing existing cross correlation between Asm Pacific Technology and SCI Engineered Materials, you can compare the effects of market volatilities on Asm Pacific and SCI Engineered 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 Asm Pacific with a short position of SCI Engineered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asm Pacific and SCI Engineered.

Diversification Opportunities for Asm Pacific and SCI Engineered

0.26

Correlation Coefficient

Asm Pacific  SCI Engineered

Modest diversification

The 3 months correlation between Asm and SCI is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Asm Pacific Technology and SCI Engineered Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Engineered Materials and Asm Pacific 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 Asm Pacific Technology are associated (or correlated) with SCI Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Engineered Materials has no effect on the direction of Asm Pacific i.e., Asm Pacific and SCI Engineered go up and down completely randomly.

Pair Corralation between Asm Pacific and SCI Engineered

Assuming the 90 days horizon Asm Pacific Technology is expected to generate 1.02 times more return on investment than SCI Engineered. However, Asm Pacific is 1.02 times more volatile than SCI Engineered Materials. It trades about 0.02 of its potential returns per unit of risk. SCI Engineered Materials is currently generating about 0.01 per unit of risk. If you would invest  3,011  in Asm Pacific Technology on September 13, 2024 and sell it today you would earn a total of  18.00  from holding Asm Pacific Technology or generate 0.6% return on investment over 90 days.

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

Asm Pacific Technology  vs.  SCI Engineered Materials

Asm Pacific Technology

Risk-Adjusted Performance

1 of 100

Weak

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

SCI Engineered Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCI Engineered Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SCI Engineered is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Asm Pacific and SCI Engineered

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

The idea behind Asm Pacific Technology and SCI Engineered Materials 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.