Correlation Between SFA Engineering and TES
Can any of the company-specific risk be diversified away by investing in both SFA Engineering and TES 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 SFA Engineering and TES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SFA Engineering and TES Co, you can compare the effects of market volatilities on SFA Engineering and TES 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 SFA Engineering with a short position of TES. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFA Engineering and TES.
Diversification Opportunities for SFA Engineering and TES
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SFA and TES is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding SFA Engineering and TES Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TES Co and SFA Engineering 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 SFA Engineering are associated (or correlated) with TES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TES Co has no effect on the direction of SFA Engineering i.e., SFA Engineering and TES go up and down completely randomly.
Pair Corralation between SFA Engineering and TES
Assuming the 90 days trading horizon SFA Engineering is expected to generate 1.68 times more return on investment than TES. However, SFA Engineering is 1.68 times more volatile than TES Co. It trades about 0.02 of its potential returns per unit of risk. TES Co is currently generating about -0.18 per unit of risk. If you would invest 2,115,000 in SFA Engineering on August 29, 2024 and sell it today you would earn a total of 5,000 from holding SFA Engineering or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SFA Engineering vs. TES Co
Performance |
| Timeline |
| SFA Engineering |
| TES Co |
SFA Engineering and TES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SFA Engineering and TES
The main advantage of trading using opposite SFA Engineering and TES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SFA Engineering position performs unexpectedly, TES 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 TES will offset losses from the drop in TES's long position.| SFA Engineering vs. Daou Data Corp | SFA Engineering vs. Busan Industrial Co | SFA Engineering vs. Busan Ind | SFA Engineering vs. Shinhan WTI Futures |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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