Correlation Between Interlink Communication and SCG PACKAGING
Can any of the company-specific risk be diversified away by investing in both Interlink Communication and SCG PACKAGING 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 Interlink Communication and SCG PACKAGING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Interlink Communication Public and SCG PACKAGING PCL NVDR, you can compare the effects of market volatilities on Interlink Communication and SCG PACKAGING 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 Interlink Communication with a short position of SCG PACKAGING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interlink Communication and SCG PACKAGING.
Diversification Opportunities for Interlink Communication and SCG PACKAGING
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Interlink and SCG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Interlink Communication Public and SCG PACKAGING PCL NVDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCG PACKAGING PCL and Interlink Communication 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 Interlink Communication Public are associated (or correlated) with SCG PACKAGING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCG PACKAGING PCL has no effect on the direction of Interlink Communication i.e., Interlink Communication and SCG PACKAGING go up and down completely randomly.
Pair Corralation between Interlink Communication and SCG PACKAGING
Assuming the 90 days trading horizon Interlink Communication Public is expected to generate 0.61 times more return on investment than SCG PACKAGING. However, Interlink Communication Public is 1.64 times less risky than SCG PACKAGING. It trades about -0.04 of its potential returns per unit of risk. SCG PACKAGING PCL NVDR is currently generating about -0.11 per unit of risk. If you would invest 670.00 in Interlink Communication Public on September 1, 2024 and sell it today you would lose (85.00) from holding Interlink Communication Public or give up 12.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Interlink Communication Public vs. SCG PACKAGING PCL NVDR
Performance |
| Timeline |
| Interlink Communication |
| SCG PACKAGING PCL |
Interlink Communication and SCG PACKAGING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Interlink Communication and SCG PACKAGING
The main advantage of trading using opposite Interlink Communication and SCG PACKAGING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interlink Communication position performs unexpectedly, SCG PACKAGING 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 SCG PACKAGING will offset losses from the drop in SCG PACKAGING's long position.The idea behind Interlink Communication Public and SCG PACKAGING PCL NVDR 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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