Correlation Between Book and SCG Construction

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

By analyzing existing cross correlation between Book And Educational and SCG Construction JSC, you can compare the effects of market volatilities on Book and SCG Construction 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 Book with a short position of SCG Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Book and SCG Construction.

Diversification Opportunities for Book and SCG Construction

0.29

Correlation Coefficient

Book  SCG Construction

Modest diversification

The 3 months correlation between Book and SCG is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Book And Educational and SCG Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCG Construction JSC and Book 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 Book And Educational are associated (or correlated) with SCG Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCG Construction JSC has no effect on the direction of Book i.e., Book and SCG Construction go up and down completely randomly.

Pair Corralation between Book and SCG Construction

Assuming the 90 days trading horizon Book And Educational is expected to under-perform the SCG Construction. In addition to that, Book is 1.5 times more volatile than SCG Construction JSC. It trades about -0.01 of its total potential returns per unit of risk. SCG Construction JSC is currently generating about 0.12 per unit of volatility. If you would invest  6,540,000  in SCG Construction JSC on December 27, 2024 and sell it today you would earn a total of  890,000  from holding SCG Construction JSC or generate 13.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

Book And Educational  vs.  SCG Construction JSC

Book And Educational

Risk-Adjusted Performance

Very Weak

Over the last 90 days Book And Educational has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Book is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SCG Construction JSC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCG Construction JSC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, SCG Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Book and SCG Construction

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

The idea behind Book And Educational and SCG Construction JSC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.