Correlation Between Romcab SA and SCUT SA

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

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

Diversification Opportunities for Romcab SA and SCUT SA

0.34

Correlation Coefficient

Romcab SA  SCUT SA

Weak diversification

The 3 months correlation between Romcab and SCUT is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Romcab SA and SCUT SA BACAU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCUT SA BACAU and Romcab SA 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 Romcab SA are associated (or correlated) with SCUT SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCUT SA BACAU has no effect on the direction of Romcab SA i.e., Romcab SA and SCUT SA go up and down completely randomly.

Pair Corralation between Romcab SA and SCUT SA

Assuming the 90 days trading horizon Romcab SA is expected to generate 3.36 times more return on investment than SCUT SA. However, Romcab SA is 3.36 times more volatile than SCUT SA BACAU. It trades about 0.15 of its potential returns per unit of risk. SCUT SA BACAU is currently generating about 0.19 per unit of risk. If you would invest  2.08  in Romcab SA on December 21, 2024 and sell it today you would earn a total of  1.64  from holding Romcab SA or generate 78.85% return on investment over 90 days.

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

Romcab SA  vs.  SCUT SA BACAU

Romcab SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Romcab SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Romcab SA displayed solid returns over the last few months and may actually be approaching a breakup point.

SCUT SA BACAU

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCUT SA BACAU are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, SCUT SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Romcab SA and SCUT SA

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

The idea behind Romcab SA and SCUT SA BACAU 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.