Correlation Between SCB X and GMM Grammy

Can any of the company-specific risk be diversified away by investing in both SCB X and GMM Grammy 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 GMM Grammy 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 GMM Grammy Public, you can compare the effects of market volatilities on SCB X and GMM Grammy 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 GMM Grammy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCB X and GMM Grammy.

Diversification Opportunities for SCB X and GMM Grammy

0.24

Correlation Coefficient

SCB X  GMM Grammy

Modest diversification

The 3 months correlation between SCB and GMM is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and GMM Grammy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMM Grammy Public 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 GMM Grammy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMM Grammy Public has no effect on the direction of SCB X i.e., SCB X and GMM Grammy go up and down completely randomly.

Pair Corralation between SCB X and GMM Grammy

Assuming the 90 days trading horizon SCB X Public is expected to generate 0.44 times more return on investment than GMM Grammy. However, SCB X Public is 2.29 times less risky than GMM Grammy. It trades about 0.07 of its potential returns per unit of risk. GMM Grammy Public is currently generating about -0.01 per unit of risk. If you would invest  8,521  in SCB X Public on October 5, 2024 and sell it today you would earn a total of  3,229  from holding SCB X Public or generate 37.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.78%
Values	Daily Returns

SCB X Public  vs.  GMM Grammy Public

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.

GMM Grammy Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMM Grammy Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GMM Grammy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SCB X and GMM Grammy

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

The idea behind SCB X Public and GMM Grammy Public 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.