Correlation Between Science Applications and Quaker Chemical
Can any of the company-specific risk be diversified away by investing in both Science Applications and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical, you can compare the effects of market volatilities on Science Applications and Quaker Chemical 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 Quaker Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and Quaker Chemical.
Diversification Opportunities for Science Applications and Quaker Chemical
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Science and Quaker is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Science Applications i.e., Science Applications and Quaker Chemical go up and down completely randomly.
Pair Corralation between Science Applications and Quaker Chemical
Assuming the 90 days trading horizon Science Applications International is expected to under-perform the Quaker Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Science Applications International is 1.05 times less risky than Quaker Chemical. The stock trades about -0.39 of its potential returns per unit of risk. The Quaker Chemical is currently generating about -0.36 of returns per unit of risk over similar time horizon. If you would invest 15,600 in Quaker Chemical on September 22, 2024 and sell it today you would lose (1,800) from holding Quaker Chemical or give up 11.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Science Applications Internati vs. Quaker Chemical
Performance |
| Timeline |
| Science Applications |
| Quaker Chemical |
Science Applications and Quaker Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Science Applications and Quaker Chemical
The main advantage of trading using opposite Science Applications and Quaker Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications position performs unexpectedly, Quaker Chemical 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 Quaker Chemical will offset losses from the drop in Quaker Chemical's long position.| Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc |
| Quaker Chemical vs. TERADATA | Quaker Chemical vs. Datang International Power | Quaker Chemical vs. Science Applications International | Quaker Chemical vs. Automatic Data Processing |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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