Correlation Between Promateris and SCUT SA

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

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

Diversification Opportunities for Promateris and SCUT SA

-0.4

Correlation Coefficient

Promateris  SCUT SA

Very good diversification

The 3 months correlation between Promateris and SCUT is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Promateris 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 Promateris 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 Promateris 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 Promateris i.e., Promateris and SCUT SA go up and down completely randomly.

Pair Corralation between Promateris and SCUT SA

Assuming the 90 days trading horizon Promateris SA is expected to generate 1.53 times more return on investment than SCUT SA. However, Promateris is 1.53 times more volatile than SCUT SA BACAU. It trades about -0.01 of its potential returns per unit of risk. SCUT SA BACAU is currently generating about -0.02 per unit of risk. If you would invest  780.00  in Promateris SA on September 15, 2024 and sell it today you would lose (110.00) from holding Promateris SA or give up 14.1% of portfolio value over 90 days.

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

Promateris SA  vs.  SCUT SA BACAU

Promateris SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Promateris SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Promateris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SCUT SA BACAU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCUT SA BACAU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, SCUT SA is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Promateris and SCUT SA

The main advantage of trading using opposite Promateris and SCUT SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promateris 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 Promateris 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.