Correlation Between Scottish Mortgage and Downing Strategic

Can any of the company-specific risk be diversified away by investing in both Scottish Mortgage and Downing Strategic 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 Scottish Mortgage and Downing Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Scottish Mortgage Investment and Downing Strategic Micro Cap, you can compare the effects of market volatilities on Scottish Mortgage and Downing Strategic 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 Scottish Mortgage with a short position of Downing Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scottish Mortgage and Downing Strategic.

Diversification Opportunities for Scottish Mortgage and Downing Strategic

-0.51

Correlation Coefficient

Scottish Mortgage  Downing Strategic

Excellent diversification

The 3 months correlation between Scottish and Downing is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and Downing Strategic Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Downing Strategic Micro and Scottish Mortgage 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 Scottish Mortgage Investment are associated (or correlated) with Downing Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Downing Strategic Micro has no effect on the direction of Scottish Mortgage i.e., Scottish Mortgage and Downing Strategic go up and down completely randomly.

Pair Corralation between Scottish Mortgage and Downing Strategic

Assuming the 90 days trading horizon Scottish Mortgage is expected to generate 2.52 times less return on investment than Downing Strategic. But when comparing it to its historical volatility, Scottish Mortgage Investment is 3.15 times less risky than Downing Strategic. It trades about 0.06 of its potential returns per unit of risk. Downing Strategic Micro Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  380.00  in Downing Strategic Micro Cap on December 4, 2024 and sell it today you would earn a total of  25.00  from holding Downing Strategic Micro Cap or generate 6.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

Scottish Mortgage Investment  vs.  Downing Strategic Micro Cap

Scottish Mortgage

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Scottish Mortgage is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Downing Strategic Micro

Risk-Adjusted Performance

Insignificant

Over the last 90 days Downing Strategic Micro Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain technical and fundamental indicators, Downing Strategic exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scottish Mortgage and Downing Strategic

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

The idea behind Scottish Mortgage Investment and Downing Strategic Micro Cap 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.