Correlation Between SBC Medical and Resources Connection

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

By analyzing existing cross correlation between SBC Medical Group and Resources Connection, you can compare the effects of market volatilities on SBC Medical and Resources Connection 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 SBC Medical with a short position of Resources Connection. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBC Medical and Resources Connection.

Diversification Opportunities for SBC Medical and Resources Connection

-0.05

Correlation Coefficient

SBC Medical  Resources Connection

Good diversification

The 3 months correlation between SBC and Resources is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SBC Medical Group and Resources Connection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resources Connection and SBC Medical 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 SBC Medical Group are associated (or correlated) with Resources Connection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resources Connection has no effect on the direction of SBC Medical i.e., SBC Medical and Resources Connection go up and down completely randomly.

Pair Corralation between SBC Medical and Resources Connection

Assuming the 90 days horizon SBC Medical Group is expected to generate 5.37 times more return on investment than Resources Connection. However, SBC Medical is 5.37 times more volatile than Resources Connection. It trades about 0.17 of its potential returns per unit of risk. Resources Connection is currently generating about -0.09 per unit of risk. If you would invest  7.31  in SBC Medical Group on October 22, 2024 and sell it today you would earn a total of  17.69  from holding SBC Medical Group or generate 242.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.8%
Values	Daily Returns

SBC Medical Group  vs.  Resources Connection

SBC Medical Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBC Medical Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SBC Medical is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Resources Connection

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Resources Connection are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Resources Connection is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SBC Medical and Resources Connection

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

The idea behind SBC Medical Group and Resources Connection 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 Transaction History module to view history of all your transactions and understand their impact on performance.