Correlation Between SCB X and Sriracha Construction

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

Diversification Opportunities for SCB X and Sriracha Construction

-0.38

Correlation Coefficient

SCB X  Sriracha Construction

Very good diversification

The 3 months correlation between SCB and Sriracha is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and Sriracha Construction Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sriracha Construction 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 Sriracha Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sriracha Construction has no effect on the direction of SCB X i.e., SCB X and Sriracha Construction go up and down completely randomly.

Pair Corralation between SCB X and Sriracha Construction

Assuming the 90 days trading horizon SCB X Public is expected to generate 0.3 times more return on investment than Sriracha Construction. However, SCB X Public is 3.31 times less risky than Sriracha Construction. It trades about 0.11 of its potential returns per unit of risk. Sriracha Construction Public is currently generating about -0.06 per unit of risk. If you would invest  11,750  in SCB X Public on December 30, 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.  Sriracha Construction 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.

Sriracha Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sriracha Construction Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SCB X and Sriracha Construction

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

The idea behind SCB X Public and Sriracha Construction 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.