Correlation Between SCOTT TECHNOLOGY and Tokio Marine

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

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

Diversification Opportunities for SCOTT TECHNOLOGY and Tokio Marine

0.15

Correlation Coefficient

SCOTT TECHNOLOGY  Tokio Marine

Average diversification

The 3 months correlation between SCOTT and Tokio is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings 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 Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and Tokio Marine go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and Tokio Marine

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 1.55 times more return on investment than Tokio Marine. However, SCOTT TECHNOLOGY is 1.55 times more volatile than Tokio Marine Holdings. It trades about 0.06 of its potential returns per unit of risk. Tokio Marine Holdings is currently generating about 0.01 per unit of risk. If you would invest  108.00  in SCOTT TECHNOLOGY on October 11, 2024 and sell it today you would earn a total of  10.00  from holding SCOTT TECHNOLOGY or generate 9.26% return on investment over 90 days.

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

SCOTT TECHNOLOGY  vs.  Tokio Marine Holdings

SCOTT TECHNOLOGY

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, SCOTT TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tokio Marine Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokio Marine Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tokio Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SCOTT TECHNOLOGY and Tokio Marine

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

The idea behind SCOTT TECHNOLOGY and Tokio Marine Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.