Correlation Between SCI Engineered and Surge Components

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

Diversification Opportunities for SCI Engineered and Surge Components

-0.56

Correlation Coefficient

SCI Engineered  Surge Components

Excellent diversification

The 3 months correlation between SCI and Surge is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding SCI Engineered Materials and Surge Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge Components 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 Surge Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Components has no effect on the direction of SCI Engineered i.e., SCI Engineered and Surge Components go up and down completely randomly.

Pair Corralation between SCI Engineered and Surge Components

Given the investment horizon of 90 days SCI Engineered Materials is expected to under-perform the Surge Components. In addition to that, SCI Engineered is 1.58 times more volatile than Surge Components. It trades about -0.01 of its total potential returns per unit of risk. Surge Components is currently generating about 0.05 per unit of volatility. If you would invest  230.00  in Surge Components on December 27, 2024 and sell it today you would earn a total of  10.00  from holding Surge Components or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SCI Engineered Materials  vs.  Surge Components

SCI Engineered Materials

Risk-Adjusted Performance

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 somewhat strong forward indicators, SCI Engineered is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Surge Components

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Components are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Surge Components is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SCI Engineered and Surge Components

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

The idea behind SCI Engineered Materials and Surge Components 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.