Correlation Between First Asset and Scotia International

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

Diversification Opportunities for First Asset and Scotia International

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between First and Scotia is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Energy and Scotia International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotia International and First Asset 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 First Asset Energy are associated (or correlated) with Scotia International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scotia International has no effect on the direction of First Asset i.e., First Asset and Scotia International go up and down completely randomly.

Pair Corralation between First Asset and Scotia International

Assuming the 90 days trading horizon First Asset is expected to generate 7.09 times less return on investment than Scotia International. In addition to that, First Asset is 1.65 times more volatile than Scotia International Equity. It trades about 0.01 of its total potential returns per unit of risk. Scotia International Equity is currently generating about 0.1 per unit of volatility. If you would invest  2,383  in Scotia International Equity on September 8, 2024 and sell it today you would earn a total of  383.00  from holding Scotia International Equity or generate 16.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Asset Energy  vs.  Scotia International Equity

 Performance 
       Timeline  
First Asset Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days First Asset Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, First Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Scotia International 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Scotia International Equity are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Scotia International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Asset and Scotia International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Asset and Scotia International

The main advantage of trading using opposite First Asset and Scotia International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Asset position performs unexpectedly, Scotia International 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 Scotia International will offset losses from the drop in Scotia International's long position.
The idea behind First Asset Energy and Scotia International Equity 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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