Correlation Between Servotronics and Stanley Black

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

By analyzing existing cross correlation between Servotronics and Stanley Black Decker, you can compare the effects of market volatilities on Servotronics and Stanley Black 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 Servotronics with a short position of Stanley Black. Check out your portfolio center. Please also check ongoing floating volatility patterns of Servotronics and Stanley Black.

Diversification Opportunities for Servotronics and Stanley Black

0.62

Correlation Coefficient

Servotronics  Stanley Black

Poor diversification

The 3 months correlation between Servotronics and Stanley is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Servotronics and Stanley Black Decker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Black Decker and Servotronics 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 Servotronics are associated (or correlated) with Stanley Black. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Black Decker has no effect on the direction of Servotronics i.e., Servotronics and Stanley Black go up and down completely randomly.

Pair Corralation between Servotronics and Stanley Black

Considering the 90-day investment horizon Servotronics is expected to generate 23.53 times more return on investment than Stanley Black. However, Servotronics is 23.53 times more volatile than Stanley Black Decker. It trades about 0.04 of its potential returns per unit of risk. Stanley Black Decker is currently generating about 0.0 per unit of risk. If you would invest  1,160  in Servotronics on September 27, 2024 and sell it today you would lose (76.00) from holding Servotronics or give up 6.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.03%
Values	Daily Returns

Servotronics  vs.  Stanley Black Decker

Servotronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Servotronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Stanley Black Decker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stanley Black Decker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Servotronics and Stanley Black

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

The idea behind Servotronics and Stanley Black Decker 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 Commodity Directory module to find actively traded commodities issued by global exchanges.