Correlation Between Scout Small and North Square

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

By analyzing existing cross correlation between Scout Small Cap and North Square Kennedy, you can compare the effects of market volatilities on Scout Small and North Square 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 Scout Small with a short position of North Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scout Small and North Square.

Diversification Opportunities for Scout Small and North Square

0.72

Correlation Coefficient

Scout Small  North Square

Poor diversification

The 3 months correlation between Scout and North is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Scout Small Cap and North Square Kennedy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Square Kennedy and Scout Small 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 Scout Small Cap are associated (or correlated) with North Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Square Kennedy has no effect on the direction of Scout Small i.e., Scout Small and North Square go up and down completely randomly.

Pair Corralation between Scout Small and North Square

Assuming the 90 days horizon Scout Small Cap is expected to under-perform the North Square. In addition to that, Scout Small is 1.38 times more volatile than North Square Kennedy. It trades about -0.03 of its total potential returns per unit of risk. North Square Kennedy is currently generating about 0.08 per unit of volatility. If you would invest  1,136  in North Square Kennedy on October 21, 2024 and sell it today you would earn a total of  71.00  from holding North Square Kennedy or generate 6.25% return on investment over 90 days.

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

Scout Small Cap  vs.  North Square Kennedy

Scout Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scout Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Scout Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

North Square Kennedy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in North Square Kennedy are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, North Square may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Scout Small and North Square

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

The idea behind Scout Small Cap and North Square Kennedy 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 CEOs Directory module to screen CEOs from public companies around the world.