Correlation Between SCOTT TECHNOLOGY and ESSILORLUXOTTICA

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

By analyzing existing cross correlation between SCOTT TECHNOLOGY and ESSILORLUXOTTICA 12ON, you can compare the effects of market volatilities on SCOTT TECHNOLOGY and ESSILORLUXOTTICA 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 SCOTT TECHNOLOGY with a short position of ESSILORLUXOTTICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCOTT TECHNOLOGY and ESSILORLUXOTTICA.

Diversification Opportunities for SCOTT TECHNOLOGY and ESSILORLUXOTTICA

0.46

Correlation Coefficient

SCOTT TECHNOLOGY  ESSILORLUXOTTICA

Very weak diversification

The 3 months correlation between SCOTT and ESSILORLUXOTTICA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and ESSILORLUXOTTICA 12ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSILORLUXOTTICA 12ON and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY are associated (or correlated) with ESSILORLUXOTTICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSILORLUXOTTICA 12ON has no effect on the direction of SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and ESSILORLUXOTTICA go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and ESSILORLUXOTTICA

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 13.83 times less return on investment than ESSILORLUXOTTICA. In addition to that, SCOTT TECHNOLOGY is 2.32 times more volatile than ESSILORLUXOTTICA 12ON. It trades about 0.0 of its total potential returns per unit of risk. ESSILORLUXOTTICA 12ON is currently generating about 0.07 per unit of volatility. If you would invest  8,402  in ESSILORLUXOTTICA 12ON on October 26, 2024 and sell it today you would earn a total of  4,298  from holding ESSILORLUXOTTICA 12ON or generate 51.15% return on investment over 90 days.

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

SCOTT TECHNOLOGY  vs.  ESSILORLUXOTTICA 12ON

SCOTT TECHNOLOGY

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, SCOTT TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ESSILORLUXOTTICA 12ON are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, ESSILORLUXOTTICA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCOTT TECHNOLOGY and ESSILORLUXOTTICA

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

The idea behind SCOTT TECHNOLOGY and ESSILORLUXOTTICA 12ON 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.