Correlation Between Delta Electronics and SCB X

Can any of the company-specific risk be diversified away by investing in both Delta Electronics and SCB X 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 Delta Electronics and SCB X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Delta Electronics Public and SCB X Public, you can compare the effects of market volatilities on Delta Electronics and SCB X 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 Delta Electronics with a short position of SCB X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Electronics and SCB X.

Diversification Opportunities for Delta Electronics and SCB X

0.67

Correlation Coefficient

Delta Electronics  SCB X

Poor diversification

The 3 months correlation between Delta and SCB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Delta Electronics Public and SCB X Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCB X Public and Delta Electronics 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 Delta Electronics Public are associated (or correlated) with SCB X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCB X Public has no effect on the direction of Delta Electronics i.e., Delta Electronics and SCB X go up and down completely randomly.

Pair Corralation between Delta Electronics and SCB X

Assuming the 90 days trading horizon Delta Electronics Public is expected to generate 7.73 times more return on investment than SCB X. However, Delta Electronics is 7.73 times more volatile than SCB X Public. It trades about 0.11 of its potential returns per unit of risk. SCB X Public is currently generating about 0.07 per unit of risk. If you would invest  13,800  in Delta Electronics Public on September 1, 2024 and sell it today you would earn a total of  1,250  from holding Delta Electronics Public or generate 9.06% return on investment over 90 days.

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

Delta Electronics Public  vs.  SCB X Public

Delta Electronics Public

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics Public are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Delta Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

SCB X Public

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, SCB X may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Delta Electronics and SCB X

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

The idea behind Delta Electronics Public and SCB X Public 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.