Correlation Between PAY and SC
Can any of the company-specific risk be diversified away by investing in both PAY and SC 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 PAY and SC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PAY and SC, you can compare the effects of market volatilities on PAY and SC 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 PAY with a short position of SC. Check out your portfolio center. Please also check ongoing floating volatility patterns of PAY and SC.
Diversification Opportunities for PAY and SC
Very good diversification
The 3 months correlation between PAY and SC is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding PAY and SC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SC and PAY 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 PAY are associated (or correlated) with SC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SC has no effect on the direction of PAY i.e., PAY and SC go up and down completely randomly.
Pair Corralation between PAY and SC
Assuming the 90 days trading horizon PAY is expected to generate 1.04 times more return on investment than SC. However, PAY is 1.04 times more volatile than SC. It trades about 0.0 of its potential returns per unit of risk. SC is currently generating about -0.14 per unit of risk. If you would invest 0.96 in PAY on January 30, 2024 and sell it today you would lose (0.03) from holding PAY or give up 3.5% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
PAY vs. SC
Performance |
Timeline |
PAY |
SC |
PAY and SC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PAY and SC
The main advantage of trading using opposite PAY and SC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PAY position performs unexpectedly, SC 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 SC will offset losses from the drop in SC's long position.The idea behind PAY and SC 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.Check out your portfolio center.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Transaction History View history of all your transactions and understand their impact on performance | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Equity Valuation Check real value of public entities based on technical and fundamental data | |
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |