Correlation Between SCB X and Advanced Info

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

By analyzing existing cross correlation between SCB X Public and Advanced Info Service, you can compare the effects of market volatilities on SCB X and Advanced Info 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 SCB X with a short position of Advanced Info. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCB X and Advanced Info.

Diversification Opportunities for SCB X and Advanced Info

0.62

Correlation Coefficient

SCB X  Advanced Info

Poor diversification

The 3 months correlation between SCB and Advanced is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and Advanced Info Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Info Service and SCB X 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 SCB X Public are associated (or correlated) with Advanced Info. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Info Service has no effect on the direction of SCB X i.e., SCB X and Advanced Info go up and down completely randomly.

Pair Corralation between SCB X and Advanced Info

Assuming the 90 days trading horizon SCB X is expected to generate 1.29 times less return on investment than Advanced Info. But when comparing it to its historical volatility, SCB X Public is 1.21 times less risky than Advanced Info. It trades about 0.07 of its potential returns per unit of risk. Advanced Info Service is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  21,472  in Advanced Info Service on October 6, 2024 and sell it today you would earn a total of  7,028  from holding Advanced Info Service or generate 32.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.67%
Values	Daily Returns

SCB X Public  vs.  Advanced Info Service

SCB X Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, SCB X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Advanced Info Service

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Advanced Info may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SCB X and Advanced Info

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

The idea behind SCB X Public and Advanced Info Service 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.