Correlation Between Generic Engineering and Thomas Scott

Can any of the company-specific risk be diversified away by investing in both Generic Engineering and Thomas Scott 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 Thomas Scott 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 Thomas Scott Limited, you can compare the effects of market volatilities on Generic Engineering and Thomas Scott 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 Thomas Scott. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generic Engineering and Thomas Scott.

Diversification Opportunities for Generic Engineering and Thomas Scott

0.44

Correlation Coefficient

Generic Engineering  Thomas Scott

Very weak diversification

The 3 months correlation between Generic and Thomas is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi and Thomas Scott Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomas Scott 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 Thomas Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomas Scott Limited has no effect on the direction of Generic Engineering i.e., Generic Engineering and Thomas Scott go up and down completely randomly.

Pair Corralation between Generic Engineering and Thomas Scott

Assuming the 90 days trading horizon Generic Engineering Construction is expected to generate 1.69 times more return on investment than Thomas Scott. However, Generic Engineering is 1.69 times more volatile than Thomas Scott Limited. It trades about -0.1 of its potential returns per unit of risk. Thomas Scott Limited is currently generating about -0.35 per unit of risk. If you would invest  4,353  in Generic Engineering Construction on October 22, 2024 and sell it today you would lose (349.00) from holding Generic Engineering Construction or give up 8.02% of portfolio value over 90 days.

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

Generic Engineering Constructi  vs.  Thomas Scott Limited

Generic Engineering

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Generic Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Thomas Scott Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Generic Engineering and Thomas Scott

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

The idea behind Generic Engineering Construction and Thomas Scott 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.