Correlation Between SCI Electric and KC Metalsheet

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

By analyzing existing cross correlation between SCI Electric Public and KC Metalsheet Public, you can compare the effects of market volatilities on SCI Electric and KC Metalsheet 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 SCI Electric with a short position of KC Metalsheet. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCI Electric and KC Metalsheet.

Diversification Opportunities for SCI Electric and KC Metalsheet

0.7

Correlation Coefficient

SCI Electric  KC Metalsheet

Poor diversification

The 3 months correlation between SCI and KCM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SCI Electric Public and KC Metalsheet Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KC Metalsheet Public and SCI Electric 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 SCI Electric Public are associated (or correlated) with KC Metalsheet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KC Metalsheet Public has no effect on the direction of SCI Electric i.e., SCI Electric and KC Metalsheet go up and down completely randomly.

Pair Corralation between SCI Electric and KC Metalsheet

Assuming the 90 days trading horizon SCI Electric Public is expected to generate 0.62 times more return on investment than KC Metalsheet. However, SCI Electric Public is 1.62 times less risky than KC Metalsheet. It trades about -0.05 of its potential returns per unit of risk. KC Metalsheet Public is currently generating about -0.08 per unit of risk. If you would invest  87.00  in SCI Electric Public on December 27, 2024 and sell it today you would lose (9.00) from holding SCI Electric Public or give up 10.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

SCI Electric Public  vs.  KC Metalsheet Public

SCI Electric Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCI Electric Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

KC Metalsheet Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days KC Metalsheet 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 primary indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with SCI Electric and KC Metalsheet

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

The idea behind SCI Electric Public and KC Metalsheet 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.