Correlation Between SCUT SA and Societatea

Can any of the company-specific risk be diversified away by investing in both SCUT SA and Societatea 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 SCUT SA and Societatea into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SCUT SA BACAU and Societatea de Investitii, you can compare the effects of market volatilities on SCUT SA and Societatea 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 SCUT SA with a short position of Societatea. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCUT SA and Societatea.

Diversification Opportunities for SCUT SA and Societatea

-0.5

Correlation Coefficient

SCUT SA  Societatea

Very good diversification

The 3 months correlation between SCUT and Societatea is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SCUT SA BACAU and Societatea de Investitii in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Societatea de Investitii and SCUT SA 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 SCUT SA BACAU are associated (or correlated) with Societatea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Societatea de Investitii has no effect on the direction of SCUT SA i.e., SCUT SA and Societatea go up and down completely randomly.

Pair Corralation between SCUT SA and Societatea

Assuming the 90 days trading horizon SCUT SA BACAU is expected to generate 2.45 times more return on investment than Societatea. However, SCUT SA is 2.45 times more volatile than Societatea de Investitii. It trades about 0.03 of its potential returns per unit of risk. Societatea de Investitii is currently generating about 0.05 per unit of risk. If you would invest  2,475  in SCUT SA BACAU on September 13, 2024 and sell it today you would earn a total of  625.00  from holding SCUT SA BACAU or generate 25.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

SCUT SA BACAU  vs.  Societatea de Investitii

SCUT SA BACAU

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCUT SA BACAU are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, SCUT SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Societatea de Investitii

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Societatea de Investitii has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Societatea is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SCUT SA and Societatea

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

The idea behind SCUT SA BACAU and Societatea de Investitii 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 Anywhere module to track or share privately all of your investments from the convenience of any device.