Correlation Between SCOTT TECHNOLOGY and STORE ELECTRONIC

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

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

Diversification Opportunities for SCOTT TECHNOLOGY and STORE ELECTRONIC

-0.74

Correlation Coefficient

SCOTT TECHNOLOGY  STORE ELECTRONIC

Pay attention - limited upside

The 3 months correlation between SCOTT and STORE is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and STORE ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE ELECTRONIC 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 STORE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE ELECTRONIC has no effect on the direction of SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and STORE ELECTRONIC go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and STORE ELECTRONIC

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to under-perform the STORE ELECTRONIC. But the stock apears to be less risky and, when comparing its historical volatility, SCOTT TECHNOLOGY is 1.67 times less risky than STORE ELECTRONIC. The stock trades about -0.18 of its potential returns per unit of risk. The STORE ELECTRONIC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  16,000  in STORE ELECTRONIC on December 21, 2024 and sell it today you would earn a total of  4,100  from holding STORE ELECTRONIC or generate 25.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

SCOTT TECHNOLOGY  vs.  STORE ELECTRONIC

SCOTT TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCOTT TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

STORE ELECTRONIC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STORE ELECTRONIC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, STORE ELECTRONIC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCOTT TECHNOLOGY and STORE ELECTRONIC

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

The idea behind SCOTT TECHNOLOGY and STORE ELECTRONIC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.