Correlation Between SCE Trust and SCE Trust

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

By analyzing existing cross correlation between SCE Trust II and SCE Trust III, you can compare the effects of market volatilities on SCE Trust and SCE Trust 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 SCE Trust with a short position of SCE Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCE Trust and SCE Trust.

Diversification Opportunities for SCE Trust and SCE Trust

0.06

Correlation Coefficient

SCE Trust  SCE Trust

Significant diversification

The 3 months correlation between SCE and SCE is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SCE Trust II and SCE Trust III in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCE Trust III and SCE Trust 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 SCE Trust II are associated (or correlated) with SCE Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCE Trust III has no effect on the direction of SCE Trust i.e., SCE Trust and SCE Trust go up and down completely randomly.

Pair Corralation between SCE Trust and SCE Trust

Assuming the 90 days trading horizon SCE Trust II is expected to generate 5.11 times more return on investment than SCE Trust. However, SCE Trust is 5.11 times more volatile than SCE Trust III. It trades about 0.09 of its potential returns per unit of risk. SCE Trust III is currently generating about 0.22 per unit of risk. If you would invest  2,027  in SCE Trust II on September 2, 2024 and sell it today you would earn a total of  73.00  from holding SCE Trust II or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

SCE Trust II  vs.  SCE Trust III

SCE Trust II

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCE Trust II are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, SCE Trust is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

SCE Trust III

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SCE Trust III are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, SCE Trust is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SCE Trust and SCE Trust

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

The idea behind SCE Trust II and SCE Trust III 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.