Correlation Between North East and SCB X

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

By analyzing existing cross correlation between North East Rubbers and SCB X Public, you can compare the effects of market volatilities on North East and SCB X 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 North East with a short position of SCB X. Check out your portfolio center. Please also check ongoing floating volatility patterns of North East and SCB X.

Diversification Opportunities for North East and SCB X

-0.81

Correlation Coefficient

North East  SCB X

Pay attention - limited upside

The 3 months correlation between North and SCB is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding North East Rubbers and SCB X Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCB X Public and North East 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 North East Rubbers are associated (or correlated) with SCB X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCB X Public has no effect on the direction of North East i.e., North East and SCB X go up and down completely randomly.

Pair Corralation between North East and SCB X

Assuming the 90 days trading horizon North East Rubbers is expected to under-perform the SCB X. In addition to that, North East is 1.25 times more volatile than SCB X Public. It trades about -0.17 of its total potential returns per unit of risk. SCB X Public is currently generating about 0.13 per unit of volatility. If you would invest  11,350  in SCB X Public on October 7, 2024 and sell it today you would earn a total of  450.00  from holding SCB X Public or generate 3.96% return on investment over 90 days.

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

North East Rubbers  vs.  SCB X Public

North East Rubbers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North East Rubbers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

SCB X Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, SCB X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with North East and SCB X

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

The idea behind North East Rubbers and SCB X Public 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.