Correlation Between Scilex Holding and Montauk Renewables

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

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

Diversification Opportunities for Scilex Holding and Montauk Renewables

-0.13

Correlation Coefficient

Scilex Holding  Montauk Renewables

Good diversification

The 3 months correlation between Scilex and Montauk is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables and Scilex Holding 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 Scilex Holding are associated (or correlated) with Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Scilex Holding i.e., Scilex Holding and Montauk Renewables go up and down completely randomly.

Pair Corralation between Scilex Holding and Montauk Renewables

Assuming the 90 days horizon Scilex Holding is expected to generate 3.08 times more return on investment than Montauk Renewables. However, Scilex Holding is 3.08 times more volatile than Montauk Renewables. It trades about 0.04 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.06 per unit of risk. If you would invest  36.00  in Scilex Holding on September 13, 2024 and sell it today you would lose (14.00) from holding Scilex Holding or give up 38.89% of portfolio value over 90 days.

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

Scilex Holding  vs.  Montauk Renewables

Scilex Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scilex Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Scilex Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Scilex Holding and Montauk Renewables

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

The idea behind Scilex Holding and Montauk Renewables 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.