Correlation Between Science Applications and NEXANS

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Can any of the company-specific risk be diversified away by investing in both Science Applications and NEXANS 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 Science Applications and NEXANS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Applications International and NEXANS, you can compare the effects of market volatilities on Science Applications and NEXANS 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 Science Applications with a short position of NEXANS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and NEXANS.

Diversification Opportunities for Science Applications and NEXANS

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Science and NEXANS is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and NEXANS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXANS and Science Applications 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 Science Applications International are associated (or correlated) with NEXANS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXANS has no effect on the direction of Science Applications i.e., Science Applications and NEXANS go up and down completely randomly.

Pair Corralation between Science Applications and NEXANS

Assuming the 90 days trading horizon Science Applications is expected to generate 1.04 times less return on investment than NEXANS. But when comparing it to its historical volatility, Science Applications International is 1.21 times less risky than NEXANS. It trades about 0.03 of its potential returns per unit of risk. NEXANS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,192  in NEXANS on September 19, 2024 and sell it today you would earn a total of  1,368  from holding NEXANS or generate 14.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Science Applications Internati  vs.  NEXANS

 Performance 
       Timeline  
Science Applications 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.
NEXANS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NEXANS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Science Applications and NEXANS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Science Applications and NEXANS

The main advantage of trading using opposite Science Applications and NEXANS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications position performs unexpectedly, NEXANS 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 NEXANS will offset losses from the drop in NEXANS's long position.
The idea behind Science Applications International and NEXANS 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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