Correlation Between SCI Engineered and Scientific Industries

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

Diversification Opportunities for SCI Engineered and Scientific Industries

0.67

Correlation Coefficient

SCI Engineered  Scientific Industries

Poor diversification

The 3 months correlation between SCI and Scientific is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SCI Engineered Materials and Scientific Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Industries 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 Scientific Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Industries has no effect on the direction of SCI Engineered i.e., SCI Engineered and Scientific Industries go up and down completely randomly.

Pair Corralation between SCI Engineered and Scientific Industries

Given the investment horizon of 90 days SCI Engineered Materials is expected to generate 0.52 times more return on investment than Scientific Industries. However, SCI Engineered Materials is 1.93 times less risky than Scientific Industries. It trades about 0.03 of its potential returns per unit of risk. Scientific Industries is currently generating about -0.03 per unit of risk. If you would invest  370.00  in SCI Engineered Materials on September 29, 2024 and sell it today you would earn a total of  93.00  from holding SCI Engineered Materials or generate 25.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.56%
Values	Daily Returns

SCI Engineered Materials  vs.  Scientific Industries

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.

Scientific Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scientific Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SCI Engineered and Scientific Industries

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

The idea behind SCI Engineered Materials and Scientific Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.