Correlation Between Fine Metal and SC Asset

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

Diversification Opportunities for Fine Metal and SC Asset

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fine and SC Asset is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fine Metal Technologies and SC Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SC Asset and Fine Metal 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 Fine Metal Technologies are associated (or correlated) with SC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SC Asset has no effect on the direction of Fine Metal i.e., Fine Metal and SC Asset go up and down completely randomly.

Pair Corralation between Fine Metal and SC Asset

Assuming the 90 days trading horizon Fine Metal Technologies is expected to generate 1.0 times more return on investment than SC Asset. However, Fine Metal Technologies is 1.0 times less risky than SC Asset. It trades about 0.04 of its potential returns per unit of risk. SC Asset is currently generating about 0.04 per unit of risk. If you would invest  2,686  in Fine Metal Technologies on September 14, 2024 and sell it today you would earn a total of  564.00  from holding Fine Metal Technologies or generate 21.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Fine Metal Technologies  vs.  SC Asset

 Performance 
       Timeline  
Fine Metal Technologies 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fine Metal Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fine Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
SC Asset 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SC Asset has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, SC Asset is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Fine Metal and SC Asset Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fine Metal and SC Asset

The main advantage of trading using opposite Fine Metal and SC Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fine Metal position performs unexpectedly, SC Asset 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 Asset will offset losses from the drop in SC Asset's long position.
The idea behind Fine Metal Technologies and SC Asset 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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