Correlation Between SCB X and AP Public

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

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

Diversification Opportunities for SCB X and AP Public

-0.26

Correlation Coefficient

SCB X  AP Public

Very good diversification

The 3 months correlation between SCB and AP Public is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and AP Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Public and SCB X 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 SCB X Public are associated (or correlated) with AP Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Public has no effect on the direction of SCB X i.e., SCB X and AP Public go up and down completely randomly.

Pair Corralation between SCB X and AP Public

Assuming the 90 days trading horizon SCB X Public is expected to generate 0.55 times more return on investment than AP Public. However, SCB X Public is 1.8 times less risky than AP Public. It trades about 0.07 of its potential returns per unit of risk. AP Public is currently generating about -0.11 per unit of risk. If you would invest  10,418  in SCB X Public on February 23, 2024 and sell it today you would earn a total of  332.00  from holding SCB X Public or generate 3.19% return on investment over 90 days.

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

SCB X Public  vs.  AP Public

SCB X Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, SCB X is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

AP Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AP Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with SCB X and AP Public

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

The idea behind SCB X Public and AP Public 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.