Correlation Between SCB X and Sonic Interfreight

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

Diversification Opportunities for SCB X and Sonic Interfreight

0.71

Correlation Coefficient

SCB X  Sonic Interfreight

Poor diversification

The 3 months correlation between SCB and Sonic is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and Sonic Interfreight Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Interfreight 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 Sonic Interfreight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonic Interfreight Public has no effect on the direction of SCB X i.e., SCB X and Sonic Interfreight go up and down completely randomly.

Pair Corralation between SCB X and Sonic Interfreight

Assuming the 90 days trading horizon SCB X Public is expected to generate 0.5 times more return on investment than Sonic Interfreight. However, SCB X Public is 2.01 times less risky than Sonic Interfreight. It trades about 0.07 of its potential returns per unit of risk. Sonic Interfreight Public is currently generating about -0.03 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	Significant
Accuracy	99.78%
Values	Daily Returns

SCB X Public  vs.  Sonic Interfreight 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.

Sonic Interfreight Public

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sonic Interfreight Public are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Sonic Interfreight may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SCB X and Sonic Interfreight

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

The idea behind SCB X Public and Sonic Interfreight 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.