Correlation Between Generic Engineering and SIS

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

By analyzing existing cross correlation between Generic Engineering Construction and SIS LIMITED, you can compare the effects of market volatilities on Generic Engineering and SIS 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 Generic Engineering with a short position of SIS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generic Engineering and SIS.

Diversification Opportunities for Generic Engineering and SIS

0.04

Correlation Coefficient

Generic Engineering  SIS

Significant diversification

The 3 months correlation between Generic and SIS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi and SIS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIS LIMITED and Generic Engineering 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 Generic Engineering Construction are associated (or correlated) with SIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIS LIMITED has no effect on the direction of Generic Engineering i.e., Generic Engineering and SIS go up and down completely randomly.

Pair Corralation between Generic Engineering and SIS

Assuming the 90 days trading horizon Generic Engineering Construction is expected to generate 2.24 times more return on investment than SIS. However, Generic Engineering is 2.24 times more volatile than SIS LIMITED. It trades about -0.02 of its potential returns per unit of risk. SIS LIMITED is currently generating about -0.13 per unit of risk. If you would invest  4,322  in Generic Engineering Construction on October 3, 2024 and sell it today you would lose (257.00) from holding Generic Engineering Construction or give up 5.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Generic Engineering Constructi  vs.  SIS LIMITED

Generic Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

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

SIS LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIS LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Generic Engineering and SIS

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

The idea behind Generic Engineering Construction and SIS LIMITED 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.