Correlation Between FEMALE HEALTH and SCOTT TECHNOLOGY

Can any of the company-specific risk be diversified away by investing in both FEMALE HEALTH and SCOTT TECHNOLOGY 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 FEMALE HEALTH and SCOTT TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FEMALE HEALTH and SCOTT TECHNOLOGY, you can compare the effects of market volatilities on FEMALE HEALTH and SCOTT TECHNOLOGY 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 FEMALE HEALTH with a short position of SCOTT TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of FEMALE HEALTH and SCOTT TECHNOLOGY.

Diversification Opportunities for FEMALE HEALTH and SCOTT TECHNOLOGY

0.66

Correlation Coefficient

FEMALE HEALTH  SCOTT TECHNOLOGY

Poor diversification

The 3 months correlation between FEMALE and SCOTT is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding FEMALE HEALTH and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY and FEMALE HEALTH 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 FEMALE HEALTH are associated (or correlated) with SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of FEMALE HEALTH i.e., FEMALE HEALTH and SCOTT TECHNOLOGY go up and down completely randomly.

Pair Corralation between FEMALE HEALTH and SCOTT TECHNOLOGY

Assuming the 90 days trading horizon FEMALE HEALTH is expected to generate 4.63 times more return on investment than SCOTT TECHNOLOGY. However, FEMALE HEALTH is 4.63 times more volatile than SCOTT TECHNOLOGY. It trades about -0.01 of its potential returns per unit of risk. SCOTT TECHNOLOGY is currently generating about -0.19 per unit of risk. If you would invest  65.00  in FEMALE HEALTH on December 27, 2024 and sell it today you would lose (19.00) from holding FEMALE HEALTH or give up 29.23% of portfolio value over 90 days.

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

FEMALE HEALTH  vs.  SCOTT TECHNOLOGY

FEMALE HEALTH

Risk-Adjusted Performance

Very Weak

Over the last 90 days FEMALE HEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FEMALE HEALTH is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SCOTT TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCOTT TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with FEMALE HEALTH and SCOTT TECHNOLOGY

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

The idea behind FEMALE HEALTH and SCOTT TECHNOLOGY 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.