Correlation Between Bayside Land and Scope Metals

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

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

Diversification Opportunities for Bayside Land and Scope Metals

-0.43

Correlation Coefficient

Bayside Land  Scope Metals

Very good diversification

The 3 months correlation between Bayside and Scope is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bayside Land and Scope Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scope Metals Group and Bayside Land 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 Bayside Land are associated (or correlated) with Scope Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scope Metals Group has no effect on the direction of Bayside Land i.e., Bayside Land and Scope Metals go up and down completely randomly.

Pair Corralation between Bayside Land and Scope Metals

Assuming the 90 days trading horizon Bayside Land is expected to under-perform the Scope Metals. But the stock apears to be less risky and, when comparing its historical volatility, Bayside Land is 2.33 times less risky than Scope Metals. The stock trades about -0.18 of its potential returns per unit of risk. The Scope Metals Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,441,000  in Scope Metals Group on October 12, 2024 and sell it today you would earn a total of  23,000  from holding Scope Metals Group or generate 1.6% return on investment over 90 days.

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

Bayside Land  vs.  Scope Metals Group

Bayside Land

Risk-Adjusted Performance

0 of 100

Very Weak

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

Scope Metals Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scope Metals Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Scope Metals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayside Land and Scope Metals

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

The idea behind Bayside Land and Scope Metals Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.