Correlation Between SCOTT TECHNOLOGY and ITV Dusseldorf

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

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

Diversification Opportunities for SCOTT TECHNOLOGY and ITV Dusseldorf

-0.06

Correlation Coefficient

SCOTT TECHNOLOGY  ITV Dusseldorf

Good diversification

The 3 months correlation between SCOTT and ITV is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and ITV Dusseldorf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV Dusseldorf 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 ITV Dusseldorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITV Dusseldorf has no effect on the direction of SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and ITV Dusseldorf go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and ITV Dusseldorf

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 1.88 times more return on investment than ITV Dusseldorf. However, SCOTT TECHNOLOGY is 1.88 times more volatile than ITV Dusseldorf. It trades about 0.05 of its potential returns per unit of risk. ITV Dusseldorf is currently generating about -0.21 per unit of risk. If you would invest  120.00  in SCOTT TECHNOLOGY on October 27, 2024 and sell it today you would earn a total of  2.00  from holding SCOTT TECHNOLOGY or generate 1.67% return on investment over 90 days.

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

SCOTT TECHNOLOGY  vs.  ITV Dusseldorf

SCOTT TECHNOLOGY

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 10 (%) 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.

ITV Dusseldorf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITV Dusseldorf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SCOTT TECHNOLOGY and ITV Dusseldorf

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

The idea behind SCOTT TECHNOLOGY and ITV Dusseldorf 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.