Correlation Between Societatea Nationala and SCUT SA

Can any of the company-specific risk be diversified away by investing in both Societatea Nationala and SCUT SA 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 Societatea Nationala and SCUT SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Societatea Nationala de and SCUT SA BACAU, you can compare the effects of market volatilities on Societatea Nationala and SCUT SA 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 Societatea Nationala with a short position of SCUT SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Societatea Nationala and SCUT SA.

Diversification Opportunities for Societatea Nationala and SCUT SA

0.77

Correlation Coefficient

Societatea Nationala  SCUT SA

Poor diversification

The 3 months correlation between Societatea and SCUT is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Societatea Nationala de and SCUT SA BACAU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCUT SA BACAU and Societatea Nationala 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 Societatea Nationala de are associated (or correlated) with SCUT SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCUT SA BACAU has no effect on the direction of Societatea Nationala i.e., Societatea Nationala and SCUT SA go up and down completely randomly.

Pair Corralation between Societatea Nationala and SCUT SA

Assuming the 90 days trading horizon Societatea Nationala is expected to generate 2.54 times less return on investment than SCUT SA. But when comparing it to its historical volatility, Societatea Nationala de is 3.33 times less risky than SCUT SA. It trades about 0.28 of its potential returns per unit of risk. SCUT SA BACAU is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,360  in SCUT SA BACAU on December 30, 2024 and sell it today you would earn a total of  1,100  from holding SCUT SA BACAU or generate 46.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Societatea Nationala de  vs.  SCUT SA BACAU

Societatea Nationala

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Societatea Nationala de are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Societatea Nationala displayed solid returns over the last few months and may actually be approaching a breakup point.

SCUT SA BACAU

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SCUT SA BACAU are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, SCUT SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Societatea Nationala and SCUT SA

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

The idea behind Societatea Nationala de and SCUT SA BACAU 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.