Correlation Between Electronic Control and SCI Engineered

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

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

Diversification Opportunities for Electronic Control and SCI Engineered

0.04

Correlation Coefficient

Electronic Control  SCI Engineered

Significant diversification

The 3 months correlation between Electronic and SCI is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Control Security 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 Electronic Control 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 Electronic Control Security 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 Electronic Control i.e., Electronic Control and SCI Engineered go up and down completely randomly.

Pair Corralation between Electronic Control and SCI Engineered

Given the investment horizon of 90 days Electronic Control Security is expected to generate 30.78 times more return on investment than SCI Engineered. However, Electronic Control is 30.78 times more volatile than SCI Engineered Materials. It trades about 0.1 of its potential returns per unit of risk. SCI Engineered Materials is currently generating about 0.03 per unit of risk. If you would invest  2.60  in Electronic Control Security on September 29, 2024 and sell it today you would lose (2.52) from holding Electronic Control Security or give up 96.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.56%
Values	Daily Returns

Electronic Control Security  vs.  SCI Engineered Materials

Electronic Control

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Control Security are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, Electronic Control unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 latest uncertain performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Electronic Control and SCI Engineered

The main advantage of trading using opposite Electronic Control and SCI Engineered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Control 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 Electronic Control Security 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..