Correlation Between SCB X and Teka Construction

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

Diversification Opportunities for SCB X and Teka Construction

-0.61

Correlation Coefficient

SCB X  Teka Construction

Excellent diversification

The 3 months correlation between SCB and Teka is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and Teka Construction PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teka Construction PCL 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 Teka Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teka Construction PCL has no effect on the direction of SCB X i.e., SCB X and Teka Construction go up and down completely randomly.

Pair Corralation between SCB X and Teka Construction

Assuming the 90 days trading horizon SCB X Public is expected to generate 0.5 times more return on investment than Teka Construction. However, SCB X Public is 2.01 times less risky than Teka Construction. It trades about 0.1 of its potential returns per unit of risk. Teka Construction PCL is currently generating about -0.02 per unit of risk. If you would invest  11,300  in SCB X Public on September 12, 2024 and sell it today you would earn a total of  550.00  from holding SCB X Public or generate 4.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

SCB X Public  vs.  Teka Construction PCL

SCB X Public

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, SCB X is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Teka Construction PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teka Construction PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Teka Construction 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 Teka Construction

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

The idea behind SCB X Public and Teka Construction PCL 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.