Correlation Between SMC Investment and Elcom Technology

Can any of the company-specific risk be diversified away by investing in both SMC Investment and Elcom Technology 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 SMC Investment and Elcom Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SMC Investment Trading and Elcom Technology Communications, you can compare the effects of market volatilities on SMC Investment and Elcom Technology 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 SMC Investment with a short position of Elcom Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Investment and Elcom Technology.

Diversification Opportunities for SMC Investment and Elcom Technology

0.48

Correlation Coefficient

SMC Investment  Elcom Technology

Very weak diversification

The 3 months correlation between SMC and Elcom is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding SMC Investment Trading and Elcom Technology Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcom Technology Com and SMC Investment 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 SMC Investment Trading are associated (or correlated) with Elcom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcom Technology Com has no effect on the direction of SMC Investment i.e., SMC Investment and Elcom Technology go up and down completely randomly.

Pair Corralation between SMC Investment and Elcom Technology

Assuming the 90 days trading horizon SMC Investment Trading is expected to under-perform the Elcom Technology. In addition to that, SMC Investment is 1.1 times more volatile than Elcom Technology Communications. It trades about 0.0 of its total potential returns per unit of risk. Elcom Technology Communications is currently generating about 0.09 per unit of volatility. If you would invest  1,030,000  in Elcom Technology Communications on October 4, 2024 and sell it today you would earn a total of  1,660,000  from holding Elcom Technology Communications or generate 161.17% return on investment over 90 days.

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

SMC Investment Trading  vs.  Elcom Technology Communication

SMC Investment Trading

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Elcom Technology Com

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Elcom Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SMC Investment and Elcom Technology

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

The idea behind SMC Investment Trading and Elcom Technology Communications 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.