Correlation Between Montauk Renewables and Scilex Holding

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

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

Diversification Opportunities for Montauk Renewables and Scilex Holding

-0.14

Correlation Coefficient

Montauk Renewables  Scilex Holding

Good diversification

The 3 months correlation between Montauk and Scilex is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Scilex Holding go up and down completely randomly.

Pair Corralation between Montauk Renewables and Scilex Holding

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Scilex Holding. But the stock apears to be less risky and, when comparing its historical volatility, Montauk Renewables is 3.96 times less risky than Scilex Holding. The stock trades about -0.08 of its potential returns per unit of risk. The Scilex Holding is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Scilex Holding on December 3, 2024 and sell it today you would lose (19.01) from holding Scilex Holding or give up 65.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Montauk Renewables  vs.  Scilex Holding

Montauk Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Scilex Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scilex Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Montauk Renewables and Scilex Holding

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

The idea behind Montauk Renewables and Scilex Holding 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.