Correlation Between SCB X and TAC Consumer

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

Diversification Opportunities for SCB X and TAC Consumer

-0.68

Correlation Coefficient

SCB X  TAC Consumer

Excellent diversification

The 3 months correlation between SCB and TAC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and TAC Consumer Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAC Consumer 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 TAC Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAC Consumer Public has no effect on the direction of SCB X i.e., SCB X and TAC Consumer go up and down completely randomly.

Pair Corralation between SCB X and TAC Consumer

Assuming the 90 days trading horizon SCB X Public is expected to generate 0.68 times more return on investment than TAC Consumer. However, SCB X Public is 1.48 times less risky than TAC Consumer. It trades about 0.11 of its potential returns per unit of risk. TAC Consumer Public is currently generating about 0.0 per unit of risk. If you would invest  11,700  in SCB X Public on December 27, 2024 and sell it today you would earn a total of  800.00  from holding SCB X Public or generate 6.84% return on investment over 90 days.

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

SCB X Public  vs.  TAC Consumer 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.

TAC Consumer Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days TAC Consumer Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, TAC Consumer is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SCB X and TAC Consumer

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

The idea behind SCB X Public and TAC Consumer 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.