Correlation Between Intermediate Government and SCOR PK

Can any of the company-specific risk be diversified away by investing in both Intermediate Government and SCOR PK 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 Intermediate Government and SCOR PK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Intermediate Government Bond and SCOR PK, you can compare the effects of market volatilities on Intermediate Government and SCOR PK 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 Intermediate Government with a short position of SCOR PK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and SCOR PK.

Diversification Opportunities for Intermediate Government and SCOR PK

0.1

Correlation Coefficient

Intermediate Government  SCOR PK

Average diversification

The 3 months correlation between Intermediate and SCOR is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and SCOR PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOR PK and Intermediate Government 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 Intermediate Government Bond are associated (or correlated) with SCOR PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOR PK has no effect on the direction of Intermediate Government i.e., Intermediate Government and SCOR PK go up and down completely randomly.

Pair Corralation between Intermediate Government and SCOR PK

Assuming the 90 days horizon Intermediate Government Bond is expected to generate 0.02 times more return on investment than SCOR PK. However, Intermediate Government Bond is 40.45 times less risky than SCOR PK. It trades about -0.26 of its potential returns per unit of risk. SCOR PK is currently generating about -0.02 per unit of risk. If you would invest  949.00  in Intermediate Government Bond on October 7, 2024 and sell it today you would lose (4.00) from holding Intermediate Government Bond or give up 0.42% of portfolio value over 90 days.

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

Intermediate Government Bond  vs.  SCOR PK

Intermediate Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Government Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Intermediate Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SCOR PK

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCOR PK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SCOR PK showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intermediate Government and SCOR PK

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

The idea behind Intermediate Government Bond and SCOR PK 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.