Correlation Between SCB X and Quality Houses

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

Diversification Opportunities for SCB X and Quality Houses

-0.31

Correlation Coefficient

SCB X  Quality Houses

Very good diversification

The 3 months correlation between SCB and Quality is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and Quality Houses Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Houses 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 Quality Houses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Houses Public has no effect on the direction of SCB X i.e., SCB X and Quality Houses go up and down completely randomly.

Pair Corralation between SCB X and Quality Houses

Assuming the 90 days trading horizon SCB X Public is expected to generate 0.9 times more return on investment than Quality Houses. However, SCB X Public is 1.11 times less risky than Quality Houses. It trades about 0.11 of its potential returns per unit of risk. Quality Houses Public is currently generating about -0.14 per unit of risk. If you would invest  11,750  in SCB X Public on December 29, 2024 and sell it today you would earn a total of  800.00  from holding SCB X Public or generate 6.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SCB X Public  vs.  Quality Houses Public

SCB X Public

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 8 (%) 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 April 2025.

Quality Houses Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Houses Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with SCB X and Quality Houses

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

The idea behind SCB X Public and Quality Houses 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.