Correlation Between Scope Metals and Big Tech

Can any of the company-specific risk be diversified away by investing in both Scope Metals and Big Tech 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 Scope Metals and Big Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Scope Metals Group and Big Tech 50, you can compare the effects of market volatilities on Scope Metals and Big Tech 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 Scope Metals with a short position of Big Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scope Metals and Big Tech.

Diversification Opportunities for Scope Metals and Big Tech

-0.79

Correlation Coefficient

Scope Metals  Big Tech

Pay attention - limited upside

The 3 months correlation between Scope and Big is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Scope Metals Group and Big Tech 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tech 50 and Scope Metals 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 Scope Metals Group are associated (or correlated) with Big Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tech 50 has no effect on the direction of Scope Metals i.e., Scope Metals and Big Tech go up and down completely randomly.

Pair Corralation between Scope Metals and Big Tech

Assuming the 90 days trading horizon Scope Metals Group is expected to generate 1.01 times more return on investment than Big Tech. However, Scope Metals is 1.01 times more volatile than Big Tech 50. It trades about 0.34 of its potential returns per unit of risk. Big Tech 50 is currently generating about -0.15 per unit of risk. If you would invest  1,080,000  in Scope Metals Group on September 12, 2024 and sell it today you would earn a total of  421,000  from holding Scope Metals Group or generate 38.98% return on investment over 90 days.

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

Scope Metals Group  vs.  Big Tech 50

Scope Metals Group

Risk-Adjusted Performance

26 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scope Metals Group are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Scope Metals sustained solid returns over the last few months and may actually be approaching a breakup point.

Big Tech 50

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Tech 50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Scope Metals and Big Tech

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

The idea behind Scope Metals Group and Big Tech 50 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.