Correlation Between SCB X and IRPC Public

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

Diversification Opportunities for SCB X and IRPC Public

0.05

Correlation Coefficient

SCB X  IRPC Public

Significant diversification

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

Pair Corralation between SCB X and IRPC Public

Assuming the 90 days trading horizon SCB X is expected to generate 84.39 times less return on investment than IRPC Public. But when comparing it to its historical volatility, SCB X Public is 82.88 times less risky than IRPC Public. It trades about 0.07 of its potential returns per unit of risk. IRPC Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  194.00  in IRPC Public on September 3, 2024 and sell it today you would lose (56.00) from holding IRPC Public or give up 28.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.31%
Values	Daily Returns

SCB X Public  vs.  IRPC 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 weak fundamental drivers, SCB X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IRPC Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IRPC Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, IRPC Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SCB X and IRPC Public

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

The idea behind SCB X Public and IRPC 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.