Correlation Between SCI Engineered and Environmmtl Tectonic

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

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

Diversification Opportunities for SCI Engineered and Environmmtl Tectonic

-0.25

Correlation Coefficient

SCI Engineered  Environmmtl Tectonic

Very good diversification

The 3 months correlation between SCI and Environmmtl is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SCI Engineered Materials and Environmmtl Tectonic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Environmmtl Tectonic and SCI Engineered 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 Engineered Materials are associated (or correlated) with Environmmtl Tectonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Environmmtl Tectonic has no effect on the direction of SCI Engineered i.e., SCI Engineered and Environmmtl Tectonic go up and down completely randomly.

Pair Corralation between SCI Engineered and Environmmtl Tectonic

Given the investment horizon of 90 days SCI Engineered is expected to generate 18.64 times less return on investment than Environmmtl Tectonic. But when comparing it to its historical volatility, SCI Engineered Materials is 11.54 times less risky than Environmmtl Tectonic. It trades about 0.03 of its potential returns per unit of risk. Environmmtl Tectonic is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Environmmtl Tectonic on September 29, 2024 and sell it today you would earn a total of  170.00  from holding Environmmtl Tectonic or generate 566.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

SCI Engineered Materials  vs.  Environmmtl Tectonic

SCI Engineered Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCI Engineered Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Environmmtl Tectonic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Environmmtl Tectonic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Environmmtl Tectonic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SCI Engineered and Environmmtl Tectonic

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

The idea behind SCI Engineered Materials and Environmmtl Tectonic 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..