Correlation Between TFS FINANCIAL and SCOTT TECHNOLOGY

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

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

Diversification Opportunities for TFS FINANCIAL and SCOTT TECHNOLOGY

0.52

Correlation Coefficient

TFS FINANCIAL  SCOTT TECHNOLOGY

Very weak diversification

The 3 months correlation between TFS and SCOTT is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and SCOTT TECHNOLOGY go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and SCOTT TECHNOLOGY

Assuming the 90 days trading horizon TFS FINANCIAL is expected to under-perform the SCOTT TECHNOLOGY. But the stock apears to be less risky and, when comparing its historical volatility, TFS FINANCIAL is 2.13 times less risky than SCOTT TECHNOLOGY. The stock trades about -0.02 of its potential returns per unit of risk. The SCOTT TECHNOLOGY is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  112.00  in SCOTT TECHNOLOGY on September 13, 2024 and sell it today you would earn a total of  9.00  from holding SCOTT TECHNOLOGY or generate 8.04% return on investment over 90 days.

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

TFS FINANCIAL  vs.  SCOTT TECHNOLOGY

TFS FINANCIAL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

SCOTT TECHNOLOGY

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, SCOTT TECHNOLOGY is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TFS FINANCIAL and SCOTT TECHNOLOGY

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

The idea behind TFS FINANCIAL and SCOTT TECHNOLOGY 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.